Investment Opportunities in Bermaz Auto, Malakoff, and Kerjaya Prospek

Overview:
In today’s report, we focus on three promising Malaysian companies: Bermaz Auto (BAUTO), Malakoff Corporation, and Kerjaya Prospek Group. Each presents unique opportunities for investors based on their current financial performance, upcoming projects, and market dynamics.

Investment Recommendations:

• Bermaz Auto (BAUTO): BUY at RM2.37 with a target price of RM2.90 (+22% upside).
• Malakoff Corporation: BUY at RM0.93 with a target price of RM1.05 (+12.9% upside).
• Kerjaya Prospek Group: BUY at RM1.82 with a target price of RM2.23 (+22.5% upside).

Investment Thesis:

1. Bermaz Auto (BAUTO MK)
   Bermaz Auto’s 1QFY25 results came in below expectations, with a 22.2% quarter-on-quarter drop in profit. Despite facing strong competition from new models and brands, BAUTO presents an attractive valuation at 9.6x FY25 forward earnings and offers a lush dividend yield of 8%. The company’s portfolio of brands, including Mazda, Kia, and XPeng, positions it well in the automotive market, especially with the introduction of electric vehicles.

   • Key Financials:
     • Revenue decreased by 9.7% quarter-on-quarter, and net profit fell 22.2%.
     • EBITDA margins contracted due to stiff competition in both the Malaysian and Philippine markets.
   • Catalysts:
     • The introduction of XPeng, an electric vehicle brand, could boost sales volumes.
     • Strong dividend yields and an undemanding valuation make it a good long-term hold despite short-term volatility.
   • Target Price: RM2.90 with a stop-loss at RM2.11.

2. Malakoff Corporation (MLK MK)
   Malakoff’s performance in 2Q24 marked a significant recovery, turning from a RM319 million loss in 2Q23 to a RM94 million profit in 2Q24. The extension of short-term power purchase agreements (PPAs) for the Prai power plant is expected to boost cash flow, enabling continued healthy dividend payouts. As Malaysia pushes forward with new power plants, Malakoff’s extensive experience and capacity give it an advantage.

   • Key Financials:
     • Net profit in 2Q24 rebounded by 170% year-on-year.
     • Malakoff’s capacity expansion through two new gas-fired power plants (1,400MW each) is expected to boost future earnings.
   • Catalysts:
     • Upcoming tenders for new gas-fired power plants and data centre energy demand provide substantial growth opportunities.
     • A dividend yield of 5.3% in 2024 and 5.8% in 2025 adds to the appeal.
   • Target Price: RM1.05 with a stop-loss at RM0.80.

3. Kerjaya Prospek Group (KPG MK)
   Kerjaya Prospek has had a strong 2024, achieving its replenishment target of RM1.5 billion early. The company recently secured a RM292.8 million contract for a high-rise development in Kuala Lumpur, contributing to its robust order book of RM4.7 billion. With more projects expected in 2H24, the company is poised for growth.

   • Key Financials:
     • Strong contract wins, with RM1.55 billion worth of new projects already secured in 2024.
     • Earnings growth expected to pick up in 2H24, driven by higher progress billings and new projects.
   • Catalysts:
     • The strong project pipeline, combined with the company’s track record, positions Kerjaya Prospek for sustained earnings growth.
   • Target Price: RM2.23 with a stop-loss at RM1.65.

Recommendation Date:
12 September 2024

Broker Information:
The investment recommendations and analysis are provided by UOB Kay Hian Securities (M) Sdn Bhd, a trusted financial advisory and research firm in Malaysia.