Looking at the Performance of Bermaz, UMW Toyota, and DRB Hicom During the Pandemic and Lockdown
Interested in knowing how did Bermaz (Mazda), Toyota and Proton fared during the recent lockdown. Here are 5 things you should know about them!
For people who are interested in how the car seller players in the market are performing, this article aims to analyze their performance during the recent MCO lockdown and determine which car seller is actually the star performer out of everyone. The analysis will help you determine which players you should invest in if you are looking for a car seller company to invest in, and mainly look at simple data of the companies involved and help you understand them. The main car seller players in the market are Bermaz Auto (Mazda), DRB Hicom (Proton), UMW (Toyota).
Bermaz Auto Has the Best Share Price Performance Out of the Other Car Seller Players in the Market During the MCO Lockdown.
Looking at the share price performance, Bermaz Auto has the best share price performance compared to DRB Hicom and UMW. From May 2021 to its share price currently, Bermaz Auto has a positive return of 8.4%, far outpacing the negative returns of DRB Hicom (-14.2%) and UMW (-1.1%). Breaking down the trend in share prices, all car sellers’ prices went down during the months of May 2021 and Jun 2021 when the number of Covid-19 cases increased and the government announced strict lockdowns for the whole country. However, Bermaz Auto’s trend in share price went the opposite of DRB Hicom and UMW after that, going up and achieving positive returns. DRB Hicom and UMW experienced sharp downturns in share price, where they consistently experienced negative returns until now. In essence, Bermaz Auto’s share price outperformed DRB Hicom and UMW.
Investors Seem to Expect that Bermaz Auto Will Recover and Go Higher In the Initial Stages, Compared to DRB Hicom and UMW.
In early May 2021, investors seem to have selected Bermaz Auto as their favored investment as it traded at a high price earnings ratio of 22 times to 24 times. Companies in Malaysia normally trade around 12 times to 15 times. A higher price earnings ratio than that implies that investors are positive on the company, while a lower price earnings ratio implies investors are negative. DRB Hicom traded the lowest price earnings ratio of 6.6 times initially, while UMW traded at 18.9 times.
Current valuations seem to indicate that Bermaz Auto (13.5 times) and UMW Toyota (12.1 times) have reverted back to their normal price earnings ratio, while DRB Hicom is at a very low valuation of 4.0 times.
After all, Bermaz Auto consistently made profits for the past 5 quarters compared to DRB Hicom and UMW.
In the past 5 quarters, Bermaz Auto is the only car seller that has consistently made profits in spite of the pandemic situation. It has the lowest revenue and profits among the other car sellers but has certainly shown that it is more resilient to the pandemic compared to the others. Bermaz Auto has a profit margin of about 5.5%, much higher than DRB Hicom (3.0%) and UMW (1.8%), which explains the higher investor interest and confidence in Bermaz Auto. Though, it is plain to see that both DRB Hicom and UMW are vulnerable to MCOs being implemented where they have consistently made losses. Bermaz Auto on the other hand, managed to keep afloat with positive profits.
DRB Hicom and UMW suffer from having to invest in more assets and generating lower revenue from their assets.
Diving deeper into the company’s structure, DRB Hicom and UMW have more assets at about RM44bn and RM10.7bn respectively compared to Bermaz Auto of RM1.3bn. Assets in this case play a large role for companies, as they are responsible for generating revenue for the companies, and ideally, the more assets you have, the higher the revenue you should get. Out of DRB Hicom’s assets of RM44bn, it only generates an average quarterly revenue of RM3.3bn which translates to 7.5% of its assets. UMW on the other hand, generates 23.9% in revenue from its assets, followed by Bermaz Auto at 39.8%. Perhaps then, this efficiency in generating revenue from its assets that explains the higher interest and optimism of investors on Bermaz Auto, UMW Toyota and finally DRB Hicom in that order. Bermaz Auto is the most efficient at using its assets to generate revenue. The higher the efficiency, the higher the price earnings ratio (interest and optimism) initially for the car sellers.
Ability to Cope with the Pandemic and Lockdown, and also it’s Efficiency in Generating Revenue From Its Assets Tells A Lot on Whether the Car Seller Will Do Well.
As evident from the points above, the key factor in the share price performance of a car seller is highly dependent on whether it can 1), cope with the pandemic and lockdown and 2), whether it is efficient at generating revenue from its assets. The indicator for the first point is to see whether the car seller is still making profits during a lockdown or when cases are increasing. In this case, Bermaz Auto has passed this test by still making profits compared to the other car sellers. The second point is to see how much revenue is being generated from its assets by dividing average quarterly revenue with average quarterly assets. The higher this ratio is, the better.