Auto Stats: MY Automotive (POSITIVE) - A blip in Apr 2017’s TIV
- Our 2017 TIV forecast of 610k units is unchanged. To our surprise, Apr 2017 TIV reversed 20% MoM to 42.7k units (+1% YoY), bringing 4M17 TIV to 183.6k units (+6% YoY), but remain within our 2017 forecast of 610k units (+5% YoY). We expect the TIV to hover at similar levels in May before picking up in June, leading up to the Hari Raya festivity where sales are commonly made. 2H17 would likely see better sales especially for marques with scheduled new launches (i.e. Perodua). We remain POSITIVE from a bottom-up stock pick with BUYs on MBM and Pecca for Perodua exposure, and TCM on trough valuations.
- A temporary blip in TIV. Key MoM volume contraction was mainly from Perodua and Honda whereby the former was affected by the phasing out its pre-facelift models (i.e. Axia & Bezza) while the latter saw a MoM sales hangover after a strong push in Mar 2017 to close its financial year. Overall, the MoM contraction in TIV was almost across the board except outliers such as Mazda (+21% MoM) and BMW (+6% MoM). Similarly, TIP also saw a MoM drop for almost all major marques, except Hyundai (+148% MoM) and BMW (+7% MoM). While a weak TIP typically indicates softer forward TIV, we believe that there should be some TIV recovery in May/Jun, supported by (i) facelift models in the mass-market segment (i.e. Perodua Axia & Bezza) and (ii) pre-Hari Raya sales campaigns.
PECCA Group (PECCA MK; BUY; TP: MYR1.80) – Within expectation
- Weaker QoQ earnings hit by production disruption. 9MFY6/17 net profit of MYR11.8m (+2% YoY), which met only 70% of our full-year estimate, is in-line as we expect a stronger 4QFY17 on the back of a recovery in car production by its clients (Perodua, Toyota, Nissan). Our forecasts are unchanged. Maintain BUY on Pecca with an unchanged MYR1.80 TP (14.5x CY17 EPS) for an exposure to (i) Perodua, especially for the Myvi model launch in 3Q17, (ii) potential aviation contract win.
- Better days ahead. The setback in Pecca’s automotive segment is temporary as we expect TIP to recover in 4QFY17 to support demand of mass-market models (i.e. Perodua Axia FL & Bezza FL), to be launched in time to capture demand in the upcoming Hari-Raya festivity in end-June. The launch of a new Myvi, Perodua’s premium range model, in 2H17 would also provide a growth angle for Pecca in FY18. Furthermore, a gradual recovery in the MYR against USD is beneficial to Pecca whose leather costs (65% of COGS) are mostly denominated in USD.