Investment Highlights

• March 2019 TIV was up 37% MoM and 10% YoY to 54.8K units. March 2019 TIV hit a record 27-month high, excluding the tax-holidays. TIV sales in units were lifted by a rebound in all major marques due to the shorter working month of February. 1Q19 TIV improved by 6% YoY.

• We noted the following points from the March sales figures:

1) Extraordinary showing from local carmakers. Perodua (up 12% YoY) and Proton (up 46% YoY) benefited from the the launches of the Aruz and X70 respectively. Perodua chalked up a new high in sales in over 27 months of 23.3K units, backed by the spectacular sales of passenger vehicles of 18.9K which accounted for 81% of its total sales. UMW guided that this was largely due to the stronger demand for Myvi. We expect this trend to continue for UMW in the foreseeable future. However, the Aruz did not perform up to the group’s expectations, selling only 1.5K units for March vs. its targeted average sales of 2.5K units/month. On the brighter side, Perodua is likely to register better numbers ahead as it has only delivered 4.2K units of the reported bookings of over 14K units since the launch of the 7-seater MPV. We retain our projection of a 1.5% volume growth for Perodua in 2019 with the Aruz accounting for ~11% of the total sales. Volume will still be anchored to the Myvi and Axia, while the Aruz will serve to boost its margins. For Proton, it sold a total of 6.1K units in March, with 3.0K units or 49% comprising the still popular X70. However, we believe that sales of the SUV will taper off soon and Proton will have to rely more on its recently-launched passenger vehicles i.e. the Iriz and Persona to sustain its strong sales momentum built earlier.

2) Toyota continues to shine, picking up in sales volume. We witnessed yet another amazing month for Toyota, with an increase of 26% MoM or 14% YoY to 5.9K units sold. This was backed by a spike of 49% MoM in passenger car sales, largely due to the strong demand for the new Vios. The sales of the Hilux continue to improve, at a decent 1.1K units, contributing to 18% of Toyota’s total sales volume. UMW highlighted that the top three best-selling models for Toyota were the Vios, Hilux and Rush in 1Q2019. However, we also noticed that Toyota’s market share took a dip to 23% in March from 27% in February. With that, we believe that the volume increment needs to be much stronger in order to win back some of the market share lost to Honda. In the foreseeable future, Toyota will be focusing heavily on volumebased models such as the Vios and Yaris to achieve its ambitious sales volume growth of 14% for 2019. We are excited to see how the recently-launched all-new Yaris will fare against Honda’s Jazz in the fight for market share in the entrylevel hatchback segment. For our estimates, we retain our conservative sales growth projection of 8% for Toyota as we believe that the general market outlook is still not as vibrant as what UMW is expecting.

3) Best month for Nissan in 2019. Nissan’ sales improved to a whopping growth of 85% MoM or 2% YoY. This was backed by a jump of 129% and 99% in passenger vehicles and MPV sales respectively. Tan Chong Motor guided that there will be new launches this year on top of the recent introduction of the new X-Trail facelift, which we believe will help the group capture a higher sales volume for FY19. We maintain our conservative sales growth on the group of 5% for FY19 premised on the continuing sales strength of the Serena S-Hybrid MPV in addition to the potential introduction of new models this year to fortify its margins and rebuild the Nissan brand. Key models ripe for upgrades include the Almera, Teana, Grand Livina and Navara.

• The approval rate for loans on passenger cars stood at 63.6% in February, an increase of 5.4% from January and higher than the average rate of 59.6% in 2018.

• We maintain our TIV projection of 603K units for 2019 (+0.8% YoY). The sector is lagging with no major catalysts after receiving a boon from the tax holiday in 2018. Growth in 2019 TIV will very much depend on the performance of volumeoriented players, namely Perodua, Honda, Toyota and Nissan. We have BUYs on Bermaz Auto (BAuto), Pecca Group, MBM Resources and Tan Chong Motor. Our HOLD calls are on Sime Darby, UMW Holdings and DRB-Hicom while we are UNDERWEIGHT on APM Automotive.

Source: AmInvest Research - 19 Apr 2019