Review & Outlook of the Automotive Sector: Malaysia
• Malaysia: In February 2014, total industry volume (TIV) on-year growth was higher by 12.6%yoy at 50.7k units. In addition, the TIV rose sequentially by 0.9%mom due in part to better sales performance of national carmakers, namely Perodua and Proton.
We continue to reiterate our NEUTRAL recommendation on the domestic Automotive Sector with an unchanged 2014 TIV forecast of 668,000 units. We keep NEUTRAL on all stocks under our coverage.
• Japan: TIV growth remained high at +18.4%yoy in February 2014 arguably fuelled by consumers buying ahead of the sales tax increment which is scheduled to take effect in April 2014.
• South Korea: TIV rebounded from a 4 consecutive months of decline to 2.1%yoy in January 2014 at 107.2k units thanks to improved consumer sentiment, expansion of demand on RV cars and new model release effect.
• Thailand: In January 2014, TIV plunged -45.5%yoy to 68.5k units as consumers' purchasing decisions was deterred by prolonged political upheaval and uncertain economic conditions.
below: Summary Sales and Production Data (click to enlarge)
Total industry volume was higher year-on-year in February 2014. According to the Malaysian Automotive Association (MAA), Total Industry Volume (TIV) was up by 12.6%yoy at 50.7k units in February 2014. Similarly, the TIV rose sequentially by 0.9%mom attributable in part by the better sales performance of national carmakers, namely
Perodua and Proton.
Perodua entrenched its overall lead position with higher market share. Perodua entrenched its market lead position in February 2014 as it garnered a bigger market share at 30.8%, vis-à-vis 24.1% in January 2014. The number of units sold by Perodua in February 2014 was 15.6k units, representing an increase of 6.7%yoy. Meanwhile, Proton also recorded an improvement in its market share. The pioneer national carmaker saw its market share climbed to 21.1% in February 2014, a gain of 1.7ppts relative to its share a month ago. It sold more vehicles at 10.7k units, or 4.4%yoy higher than the corresponding period last year.
below: Malaysia's Monthly TIV (click to enlarge)
Forecasts and Recommendations for Bursa-listed companies
Reaffirm 2014 TIV forecast of 668k. While it is a bit too early for a meaningful extrapolation, the annualised year-todate TIV amount to only 606k vis-à-vis our 2014 TIV forecast of 668k units. Nonetheless we expect vehicle sales to gradually pick up pace in the coming months. The sales outlook for March, for example, is expected to be better due to the longer working days, financial year end (FYE) delivery rush among car companies with FYE March, as well as introduction of new models.
Summary Recommendations of Stocks Under Coverage (click to enlarge)
Nonetheless, compared to last year, the growth momentum in 2014 may be relatively muted given the recent round of subsidy rationalization measures, i.e. increase in fuel price, removal of sugar subsidy and increase in electricity tariff, which may result in consumers being more cautious with their spending. In light of these factors, our forecasted 2014
TIV growth is a smaller +1.9%yoy at 668.0k units.
Reiterate NEUTRAL.We maintain NEUTRAL on the Automotive Sector with all stocks under our coverage, namely UMW Holdings Berhad (UMWH), MBM Resources Berhad (MBM) and Tan Chong Motor Holdings Berhad (TCM) kept on NEUTRAL at RM13.15, RM3.94 and RM6.38 respectively.