Auto
Stats: Automotive (NEGATIVE) - TIV rebounded in June
- Focus on the economical car segment. June 2016 TIV jumped 28% MoM, back to ‘normalised’ levels (>55k units monthly), mainly on pre-Hari Raya sales. This brings 1H16 TIV to 275k units (-15% YoY), representing 47% of our 2016 TIV forecast of 590k units (-11% YoY). Sector strategy is to focus on auto players with good exposure to the economical car segment amid weakness in consumer sentiment and rising cost of living.
- Catch-up in 2H16; Bezza to make a difference. Going forward, monthly TIV will need to hit an average of 52.4k units to meet our street-low 2016 TIV forecast of 590k units; this is achievable following major model launches such as Perodua Bezza and Honda Civic. Our TIV forecast is unchanged.
That said, a stronger push by
dealers for sales in 2H16 to meet their targets could come at the expense of
margins due to higher A&Ps. Furthermore, persistent volatility in USD and
JPY against MYR would also affect the profitability of auto players.
- Go green, go economical. We remain selective in our picks and favor Pecca (BUY) for its (i) growth potential riding on the rising adoption of leather upholstery, (ii) exposure to Perodua which is on a growth trajectory with the Bezza model and (iii) undemanding valuations (9x CY17 ex-cash PER – estimated net cash of MYR80m as at end-FY6/16). We also like MBM for its exposure to Perodua from three angles, as a (i) shareholder, (ii) car dealer, and (iii) supplier of autoparts. Valuations are attractive at 8x FY17 PER and 0.6x FY15 PBV.
BAuto
remains a BUY for its (i) growth potential both in Malaysia and Philippines
with its EEV-model offering, (ii) value unlocking via potential IPO of its
Philippines ops and (iii) decent 4+% yield (based on 70% DPR). Maintain SELLs
on UMWH and TCM.
For exposure in the thriving
premium segment, Cycle & Carriage Bintang (Not-rated) offers a pure
exposure to Mercedes Benz as its largest dealer in Malaysia. CNCB will be
reporting its 2Q16 results next Monday; 2Q16 Mercedes Benz volume sales jumped
28% QoQ and 3% YoY.
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