TIV likely to contract over next few months, says MIDF Research


An employee inspecting a door handle is reflected in a rear mirror of a vehicle in the general assembly shop at the SAIC-GM-Wuling Automobile Co. Baojun Base plant, a joint venture between SAIC Motor Corp., General Motors Co. and Liuzhou Wuling Automobile Industry Co., in Liuzhou, Guangxi province, China, on Wednesday, May 23, 2018. - Bloomberg

PETALING JAYA: The total industry volume (TIV) is expected to contract over the next few months post Hari Raya festivities, especially for June, given the shorter working month.

MIDF Research is also of the opinion that TIV will start showing a contraction against an inflated base during the June-August 2018 tax holiday period.

The TIV for the three months last year grew by some 27% to 41% year-on-year (y-o-y).

Last month’s TIV grew 41% y-o-y to 60,780 units with growth across the board, led by Toyota and Proton at 237.5% and 159.4% respectively.

However, this was partly due to a weak base in May 2018, where consumers held back purchases ahead of GE14.

“The May 2019 TIV also represents a 22% month-on-month (m-o-m) growth driven by pre-Raya campaigns,” the research house said in a report yesterday, while maintaining a positive recommendation on the sector.

Proton was one of the strongest performers last month with the sales of 10,611 vehicles, equivalent to a market share of 17.5%.

MIDF Research said sales of the X70 drove Proton’s performance this year but it seems that the slowdown in demand for its legacy models year-to-date was addressed last month following the launch of the facelift Persona and Iriz in late April.

The Iriz is RM1,100 to RM4,100 cheaper despite upgrades and added kits while Persona is up to RM5,000 cheaper.

“Our recent visit to a dealership suggests a 1-2 weeks waiting period for the X70 (depending on colour and variant) with increased shipments of the CBU X70 (two to three times a month),” the research house said.

Perodua is still the market leader with a market share of 37.8% last month from the sales of 22,945 vehicles.

Perodua’s growth came off a record base last year. While it registered only a 4.4% y-o-y growth last month, MIDF Research noted that Perodua was relatively unaffected by the slowdown in sales ahead of the general election last year.

Its TIV rose 28% y-o-y in May last year as compared to a 15% contraction for the overall sector, given the new MyVi that was launched in late 2017.

“Still, we expect Perodua to register a new record this year at 241,000 units, representing 6% y-o-y growth,” said MIDF Research, adding that the year-to-date TIV for the sector is 253,707 units which is in line, accounting for 42% of its 2019F TIV of 599,000 units.

MBM Resource Bhd remains MIDF Research’s top pick, due to Perodua’s strong 6% y-o-y growth in TIV expansion on the back of the Aruz to fill up a vacuum in the car maker’s model mix, a recovery in industry production driven by the new national car launches and the disposal of its loss making alloy wheel operations.

It reiterates its “buy” call on MBM with a target price of RM4.20.

The research house also retains its “buy” recommendation on BERMAZ AUTO BHD as it is cheap at just 10.8 times its CY19F earnings with an attractive dividend yield of 7%.

Among key catalysts are the launch of the Mazda CX8 in October or November and CX30 in 2HFY20, dividend outperformance, over 50% increase in FY20F export volumes driven by the CX8, potential National Automotive Policy (NAP) incentives to drive CBU exports and the potential localisation of the CX30.


   

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