- Numbers may hold up
well despite shorter working month: August TIV is scheduled to be announced
sometime this week. We expect it to be seasonally weak relative to July due to
a short working month (Raya holidays in late August), 3-4 days effective plant
shutdowns and an exceptionally strong month in July. We estimate August TIV at
circa 53K, which represents a 13% MoM contraction and 8% YoY drop. August 2011
TIV was particularly strong due to a temporary recovery from the Japan
earthquaketriggered supply shortage. Despite a short working month, Aug 2012 TIV held up well above Jan-Feb 2012
numbers of 40-44K (Chinese New Year celebration) and compares very well against
Sept 2011 TIV of 44,407 units (Raya celebrations in 2011). YTD (to August 2012)
TIV of 416,315 units is still 2.6% higher than the same period last year.
- Policy
uncertainties may dampen sales: In the near term, uncertainties surrounding
sector policies (in particular, duties) will slightly dampen sales as consumers
are likely to hold back purchases in anticipation of cheaper car prices. Our channel checks suggest that any duty
reduction will be gradual (circa 5%-10%/annum over several years) and this
should cushion any excessive slowdown as there is effectively no way of getting
around the reduction in car values, from a consumer standpoint. The corresponding
decrease in government income will have to be offset elsewhere, e.g. reduction
in fuel subsidy/ sales tax increase.
- Our numbers already
factor in a weaker 2H12: We maintain our numbers at this juncture as we have
already factored in a weaker 2H12. Annualised 8M12 estimate of 624,473 units is
3% ahead of our 2012 forecast of 607,625. We estimate an average TIV of
47,827/month for the rest of the year to hit our forecast vs. 52,039/month
achieved in 8M12. The launch of Nissan’s Bsegment model, the Almera, should
provide a fresh boost to TIV in 4Q12. Management is targeting sales of
1-2K/month and bookings have been opened since early September. Note that sales
in the first few months will typically exceed expectations due to initial hype
towards the model.
- ELV policy if
implemented could be a huge positive: Malaysia has a total vehicle population
of 22mil as of June 2012, of which 10mil are motor vehicles. Up to 3.2mil are
>15 years of age and 4.9mil are >10 years – reflecting the robust pool of
vehicles with potential to be scrapped and replaced with new cars. As old car
owners will typically opt for lower-priced new cars given low scrap values
received for their old cars (typically RM2,000-RM5,000), we believe Perodua and
Proton stand to benefit the most from any move to implement ELV.
- UMW (BUY, FV:
RM12.70) and MBM (BUY, FV: RM5.40) remain our two high conviction sector picks:
Key catalysts: (1) Proxies to Perodua (MBM & UMW) and Proton (MBM via
Hirotako’s airbag supplies), which are key beneficiaries of potential ELV implementation;
(2) A Toyota-specific replacement cycle off a record base of 101,629 units in
2008, underpinned by the new Vios launch next year; (3) Improving O&G
earnings prospect with potentially another rig acquisition by end September;
(4) An underleveraged balance sheet allows room for potential acquisitions,
particularly in the auto sector.
- Following a steep
8%-15% correction in the past week, MBM is now particularly attractive from a
valuation standpoint. We like MBM for its:- (1) Strategic move up the value
chain to become a multi-brand vehicle assembly player from a mere dealership operator currently which
should trigger a strong PE re-rating –
closer to incumbents’ 10x-13x CY13F PE from 7.5x currently; (2) Undervalued stake
in Perodua – implied 5x FY13F earnings (See Table 4).
Source: AmeSecurities
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