- Numbers hold up well despite shorter working month: August
TIV was 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. August TIV at registered at 51,823 units,
which represents a 13% MoM contraction and 11% YoY drop. August 2011 TIV was
particularly strong due to a temporary recovery from the Japan
earthquake-triggered 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
Sep 2011 TIV of 44,407 units (2011 Raya celebrations). YTD TIV of 412,526 units
is still 1.6% 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) and will be
executed over several years. 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: Annualised
8M12 estimate of 618,789 units is 2% ahead of our 2012 forecast of 607,625. We
maintain our numbers at this juncture as we have already factored in a weaker
2H12. We estimate an average TIV of 48,650/month for the rest of the year to
hit our forecast vs. 51,566/month achieved in 8M12. The launch of Nissan’s
B-segment model, the Almera may provide a fresh boost to TIV in 4Q12.
Management is targeting sales of 1-2K/month and bookings have been opened since
early September. 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
RM2000-5000), we think 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
of this week (costing US$212mil for July 2013 delivery and is estimated
to provide incremental earnings of RM30mil/annum, or 3% on full eyar basis in FY14F
and 1% to group bottomline in FY13F; (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) Deeply undervalued (20% direct) stake in Perodua – implied 5x FY13F
earnings (See Table 4); (2) 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.
Source: AmeSecurities
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