Automotive (NEGATIVE) - The next big thing is here!

Automotive (NEGATIVE) - The next big thing is here!

• Perodua Bezza, the largest MY model launch of 2016. Perodua has unveiled its first sedan model, the EEV-certified Bezza, over the weekend. Priced competitively between MYR37-51k, this model is expected to give Proton’s entry models (i.e. Saga, Iriz, Persona) a run for their money. We raise CY16/17/18 sales forecasts for Perodua to 225k/ 250k/240k units, lifting our FY16/17/18 earnings forecasts for UMWH, MBM and Pecca by 1%-12%. MBM is now a BUY with a higher TP of MYR2.70. Pecca/UMWH remain as BUY/SELL with higher TPs of MYR1.95/4.65.
• To bring Perodua to the next level? While the official launch for the Bezza model is scheduled for 21 July, Perodua dealers have started taking orders and we expect the initial inventory built up of ~10k units to be quickly taken up. Perodua expects to sell 7.6k units of Bezza per month in 2016; 38k units for the remaining 5 months of 2016. With the new Bezza, we believe that Perodua will be more aggressive in pushing for export sales to neighbouring countries which would further benefit Perodua’s auto parts vendors (i.e. APM, MBM, Pecca) in terms of scale.

• Beneficiaries of Bezza’s successful launch. In terms of exposure to Perodua, we believe that MBM is the largest with: (i) Perodua being a 22.6%-owned associate which accounts for 80-85% of MBM’s bottomline, we estimate, (ii) ~10-11% of Perodua cars sold in Malaysia are via MBM’s DMM Sales (DMMS), (iii) auto parts supplies (i.e. seatbelts, airbags and wheels) via Hirotako and OMI, both under MBM.

Pecca benefits as the sole supplier of leather car seat covers to Perodua while UMWH sees positive exposure from its 38%-stake in Perodua itself.