KUALA LUMPUR: Bermaz Auto Bhd's (BAuto) partnership with Kia Motors Corp will likely deliver sales of about 2,000 units of Kia vehicles next year, some analysts said.
This would subsequently more than triple to 7,000 units in 2023, according to CGS-CIMB Research.
MIDF Research believes that over four to five years, Kia's sales volume can match or exceed BAuto's Mazda volume of between 10,000 and 12,000 per annum.
BAuto and Kia on Friday signed an agreement to form Kia Malaysia Sdn Bhd to undertake the assembly of completely knocked down (CKD) Kia vehicles in Malaysia.
CGS-CIMB said the partnership was BAuto's effort to expand its portfolio offerings across middle-to-premium segments.
This came after the recent addition of Peugeot distributorship under a 20 per cent-owned associate Berjaya Auto Alliance.
CGS-CIMB said BAuto and Kia would hold 33.3 per cent and 66.7 per cent stakes in Kia Malaysia with an initial investment of RM20 million and RM40 million respectively.
The South Korean carmaker has also appointed BAuto's subsidiary Dinamikjaya Motors Sdn Bhd as the new distributor of Kia vehicles in Malaysia.
Dinamikjaya holds the right to distribute and sell Kia vehicles, CKD and completely built-up (CBU) models, sales of genuine parts as well as the provision of after sales service in Malaysia.
CGS-CIMB analyst Mohd Shanaz Noor Azam said Dinamikjaya would be a bigger sales volume driver than Berjaya Auto.
"We also see an attractive opportunity for the after sales services business given that there have been over 45,000 Kia vehicles sold in Malaysia over the past 10 years," he said in a report.
Mohd Shanaz said BAuto's 29 per cent-owned associate Inokom would benefit from higher assembly volumes given that Kia Malaysia was expecting to utilise Inokom's production assembly in Kulim, Kedah.
"BAuto could also benefit from Kia's aggressive electric vehicle (EV) roadmap strategy given that the Korean marque plans to introduce 11 EV models by 2027," he said.
Kia and BAuto said three models were initially planned for the Malaysian market.
The first two models - Kia Seltos and Kia Carnival - are expected to be produced locally under the new set up, while the third model will be determined at a later stage.
"We gathered that Kia Malaysia plans to start the CKD assembly with the Carnival in the fourth-quarter of 2021, followed by Kia Seltos in the second quarter of 2022," he said.
Kia plans to establish Kia Malaysia as the regional manufacturing hub for its vehicles in Asean countries and other potential markets.
CGD-CIMB raised BAuto's financial year ending April 30, 2022 to 2023 (FY22-FY23) earnings per share (EPS) by 5.0 per cent to 15 per cent and retain "add" call with a higher target price of RM1.88 per share.
The higher EPS forecast takes into account new volume contribution from Dinamikjaya as BAuto might deliver a combined 16,000 and 20,500 units sales volume in FY22 and FY23 respectively.
"We expect a two-year earnings per share compound annual growth rate (CAGR) of 29 per cent (FY21-FY23)."
MIDF Research analyst Hafriz Hezry said Kia aimed to make Kia Malaysia its assembly hub for Asean (Thailand, the Philippines, Cambodia).
"Kia currently has little manufacturing presence within Asean, with only one joint-venture in Vietnam for assembly of left-hand drive models for its domestic market.
"Exports is expected to commence within the same timeline as domestic CKD models.
"We think Kia Malaysia has the potential to serve as an important platform to leapfrog Kia's expansion within this region," he said in a report.
"Beyond immediate-term prospects, Kia also has a range of EV and hybrid models, which would prepare BAuto well for the eventual transition within the next one to two decades."
Hafriz said Dinamikjaya could turn in profits within the first year of operations by FY22, based on the targeted 2,000-2,500 units in 2022.