- Making Perodua-badged sedans a reality: Local dailies this
morning reported that Perodua is looking at producing sedan models under the
Perodua badge. It is said that feasibility studies with Perodua’s Japanese
partners have already started. No details on timeline and details of the study
are forthcoming at this juncture.
- Earlier rumours (sometime in February and April 2012)
suggested that Perodua is looking at producing sedan models higher than 1.5
litres. Additionally, the same rumours had suggested that development will see
the involvement of a JV with UMW Holdings (which is the largest local
shareholder of Perodua with a 38% stake). Perodua CEO, Datuk Aminar Rashid,
however, denied such rumours in an interview yesterday.
- Plugging the gap in the small engine sedan segment?: We
had highlighted in earlier reports of the possibiliy of the Perodua sedan,
particularly in the 1.3 litre compact sedan B-segment where both Toyota and
Perodua are currently absent. Toyota clearly is not able to penetrate this
segment effectively given its status as a non-national marque. Perodua,
however, provides a leeway. The B-segment is the largest segment in Malaysia’s
car market accounting for 30%-40% of TIV. The move to develop a sedan should
strengthen Perodua’s B-segment foothold and give the Proton Saga a run for its
money.
- Use of an existing platform may accelerate time-to-market:
Daihatsu does not currently have any sedan model in its product line-up.
However, Toyota, which is Daihatsu’s parent company, has several. We do not
rule out the possibility of Daihatsu utilising Toyota’s existing platform,
particularly the Vios. Such a move should halve production cost (as platform development
typically takes up half of development cost of an entirely new model) as well
as shorten time-to-market. This is not an entirely new idea – Toyota had in
late-2010 introduced a compact sedan model (which is slightly shorter and
narrower versus the Vios) called the Toyota Ethios for the Indian market. The
model is said to be a derivative of the Vios platform.
- Notably, the current generation Vios is due for a full
model replacement sometime in 2013 (we anticipate 1H13). Our meetings with
industry players in the past two months also suggested that Perodua is toying
with the idea of introducing an entirely new model “which is not exactly a
replacement of any existing model” and could be a model developed specifically
for the ASEAN market. Notably, ASEAN is the largest export market for Daihatsu
with Malaysia and Indonesia accounting for the bulk of it.
- UMW (BUY, FV: RM11/share) and MBM (BUY, FV: RM4.70/share)
are key proxies to Perodua: However, MBM provides a much cheaper access,
trading at 9x FY12F earnings vs. UMW’s 13x. Additionally, MBM provides more
leverage to Perodua earnings as its 20% direct stake in the group accounts for
60%-70% of MBM’s bottomline vs. close to 30% for UMW. Nonetheless, UMW’s strong
balance sheet suggests potential acquisitive growth in the auto sector, while
valuations are still at a discount to mid-cycle PE of 14x – despite record
earnings in the next 2-3 years.
- Parts players are also potential beneficiaries: The parts
players are the clear winners should Perodua proceed with the project given an
entirely new volume model coming into the market, which should increase parts orders.
Additionally, Perodua’s models are highly localised (85%-90% rate). We like APM
(BUY, FV: RM6.50/share) and Hirotako (subsidiary of MBM, a key local airbag and
seatbelt system manufacturer in Malaysia) as key auto parts plays in the
theme.
Source: AmeSecurities
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