CIMB Research maintains Neutral on Malaysia’s auto sector

Published: Monday September 23, 2013 MYT 8:35:00 AM
Updated: Monday September 23, 2013 MYT 8:37:32 AM

KUALA LUMPUR: CIMB Equities Research is maintaining its Neutral outlook on Malaysia automobile sector.

It said on Monday that UMW’s dominance of the sector continues but recent results show how hard it is to sustain earnings growth without diversification.

As for DRB-Hicom, it said the group continues to struggle with Proton, leaving Tan Chong as its only Outperform and top pick in the sector.

“As expected, August’s sales normalised after the pent-up demand and pre-Hari Raya sales jump in July. Total vehicle sales came in at 51,823 units, down 25% on-month and down 1.4% on-year. The total figure for 2013 as of Aug is 432,953 units, up 5% year-to-date,” it said.

CIMB Research said the segmental market share trends continued unabated, with non-national sales continuing to take market share from the national segment; Proton continued to lose share to Perodua and Nissan, while Toyota continued to lose share to Honda.

“We make no changes to our 0% growth forecast or 630,000 units for the full year. Although YTD growth is currently 5%, we expect 4Q13’s on-year sales growth to be affected by base effects following the exceptionally strong 4Q12 due to pent-up demand after the September 2012 Budget and easy credit.

“We do not expect a strong finish this year. Excise duties will not be cut and other austerity measures expected in the Budget (to be announced on Oct 28) could affect sentiment, in addition to a tightening credit environment.

“Expectations of a GST introduction to replace the 10% sales tax in the Budget could cut a few percentage points off car prices but not enough to change our view of market saturation. Stay invested in Tan Chong which will stand out as a prime beneficiary of the weaker yen and a strong new model line-up,” it said.