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RAM Ratings affirms AA3/P1 ratings of Bermaz’s Islamic programmes
Published on 07 Jan 2025.
RAM Ratings has affirmed the respective P1 and AA3/Stable ratings of Bermaz Auto Berhad’s (Bermaz or the Group) Islamic Commercial Papers (ICP) Programme (2020/2027) and Islamic Medium-Term Notes (IMTN) Programme. The two issues have a combined limit of RM500 mil.
Bermaz’s issue ratings are supported by the Group’s established niche in the affordable premium segment as well as its robust financial profile and cashflow generation ability. These factors will allow it to ride out the impact of slower sales due to competition from new Chinese entrants and an anticipated moderation of future total industry volume (TIV).
Bermaz reported another positive year in FY Apr 2024, underscored by healthy demand for Mazda completely knocked down (CKD) models like the CX-5 and CX-30 and a strong post-pandemic economy which boosted the Group’s pre-tax profit by 14.26% y-o-y to RM483.66 mil. Its performance in 1H FY Apr 2025, however, fell short in view of competition from aggressive promotion strategies of Chinese marques, a slower lineup release timeline and tapering consumer demand. Pre-tax profit was down a substantial 41.2% y-o-y at RM154.82 mil as a result.
Given the Group’s sluggish first half performance, we expect sales to be lower than their FY Apr 2024 peak for the rest of the current fiscal year on account of new model releases and seasonal year-end inventory clearance sales, notwithstanding changes in consumer sentiment and economic conditions. Mazda’s market share remained within the 2% to 3% range in 2023 and 1H 2024, placing it fourth among non-national marques in Malaysia, behind Toyota, Honda and Mitsubishi. In August 2024, Bermaz introduced the XPeng G6 into its electric vehicle (EV) model lineup after entering into a distribution agreement with the marque earlier this year. Current G6 offerings come only as completely built units, at prices comparable to the Tesla Model Y. In November 2024, the Group was awarded the distribution rights of Chinese electric vehicle brand Deepal, announcing plans for model launches in mid-2025.
The Group’s total debt rose to RM371.46 mil on account of higher working capital requirements as at end-October 2024, translating to a higher gearing ratio of 0.45 times from 0.17 times as at end-April 2024. This, combined with weaker earnings in 1H FY Apr 2025, led to weaker annualised funds from operations debt coverage of 0.50 times, albeit still considered strong for its rating. Bermaz remains in a net cash position supported by cash balances of RM458.34 mil (FY Apr 2024: RM364.82 mil), and amply covers its short-term obligations. Its solid financial position and good access to bank facilities and capital markets will keep the Group resilient during disruptive periods over the near term.
With minor capital expenditure and investments – including those for the refurbishment and expansion of Mazda, Kia, Xpeng and Deepal showrooms – expected over the next three years to be funded by internal cashflow generation, we expect Bermaz to remain in a net cash position. The Kia marque will continue to be revitalised through improved service standards, warranty support, and the rollout of new and facelifted models in the coming years.
Constraining the ratings are franchise renewal risk, the increasingly competitive and rapidly evolving business environment, and the Group’s vulnerability to economic cycles and changes in regulatory policy.
Analytical contact
Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
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Published by RAM Rating Services Berhad
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