AmInvest Research retains overweight for auto sector, MBMR top pick

  • Auto
  • Monday, 06 Jul 2020

KUALA LUMPUR: AmInvestment Research is retaining its overweight recommendation for the auto sector with a total industry vehicles (TIV) projection of 565,000 units for 2020. In its research note issued on Monday, it expects TIV in 2H2020 to be supported by improved performances across the board for all major automakers.

AmInvest Research attributed its optimism due to the implementation of the short-term National Economic Recovery Plan (Penjana), entailing a 100% and 50% sales tax (SST) exemption on locally assembled (CKD) and fully imported (CBU) car models respectively from June 15, 2020 until Dec 31, 2020.

The SST exemptions have resulted in reduced car prices of 1.1% to 6.5% for all automakers. “We strongly believe that this is a very much needed shot in the arm for local vehicle sales, which is similar to the three-month tax holiday in June to August 2018,” it said.

Recall that the zero-GST “tax holiday” in 2018 resulted in a 3% to 5% cut in car prices, and spurring demand with a total sale of 198,500 units for that quarter (+42% QoQ, +32% YoY). “We expect a similar trend from this SST exemption over the next 6 months.

“Our top pick for the sector is MBM Resources (FV: RM4.62 a share). We think that MBM Resources is currently undervalued, trading at 6.3 times FY21F EPS, compared to the sector average of 11.2 times. “We strongly believe that the group will continue its strong showing as a direct proxy to Perodua’s dominance in the local automotive sector,” it said.

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