Investment Highlights

• April 2019 TIV was down 9% MoM and up 6% YoY to 50.0K units. On a cumulative basis, 4M19 TIV grew 6% YoY to 193.0K units compared with 182.2K units for 4M18. The YTD TIV was within our forecast of 603K (+0.8% YoY) for 2019, accounting for 32% of our full-year estimate.

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

1) Perodua registered a total sales volume of 22.1K units (-5% MoM, +11% YoY). With a year-to-date (YTD) sales of 82.8K units, Perodua is currently well on track at 36% to achieving its 2019 target of 231.0K units. We continue to witness a steady delivery for passenger vehicles of 17.8K units which accounted for 80% of its total sales. We believe that this was due to the ongoing demand for the Myvi and we expect this trend to continue for Perodua in the foreseeable future. The Aruz however, disappointed again where we saw total sales of 1.1K units for April vs. its targeted average sales of 2.5K units/month. The UMW group guided that the Aruz recorded the highest number of registrations in April since it was launched and hence, we retain our projection of a 1.5% volume growth for Perodua in 2019 with the Aruz accounting for ~11% of the total sales.

2) Proton recorded an 8-month high in April at 7.0K units sold (+14% MoM, +75% YoY). This was largely due extraordinary sales of passenger vehicles of 4.0K units. We believe that this was due to deliveries of the newly-launched Iriz and Persona with very attractive and affordable price tags. The sales of the popular X70 declined to its lowest since its launch at 2.6K units in April and we believe this is unsurprising. We expect the sales of the SUV to taper off a little more to our estimates at 2K units/month as the hype slowly diminishes going forward.

3) Honda disappointed in April, only registering 6.2K units (-29% MoM, -20% YoY) in total sales. This was mainly due to lower sales in its major volume segments, achieving only 3.2K units (-27% MoM) and 2.1K units (-36% MoM) sold in the passenger cars and SUV segments respectively. In regards to the poor performance, Honda’s market share took a dip to 30% from 34% in March.

4) Toyota sold 5.5K units (-7% MoM, -1% YoY) in April. The UMWH management guided that this could be due to some potential buyers holding back purchases of the Vios in anticipation of the launch of the all-new Yaris in mid-April. It also highlighted that the hatchback proved to be a volume-driven model, having joined the Vios and Hilux as Toyota’s top three best-selling models for the month despite the late launch. Combined with the dampened sales of Honda and Perodua in April, we witnessed Toyota’s market share climbed to 26% in April from 23% in March. We believe that the volume increment needs to be much stronger in order to win back some of the market share from Honda. In the foreseeable future, Toyota will be focusing heavily on volume-oriented models such as the Vios and Yaris to achieve its ambitious sales volume growth of 14% for 2019. 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.

5) Mazda saw its sales volume normalizing after a slowdown for the past 2 months, registering total sales of 1.3K units (+29% MoM, 16% YoY) in April. The increase was backed by higher sales in passenger cars and SUVs at 0.4K units (+68% MoM) and 0.9K units (+20% MoM) respectively. We expect sales to improve ahead as there are upcoming launches this year for the group; namely the M3, CX-8 and CX-30 with tentative launches in June, September and December respectively.

• We believe that the promotional campaigns for the festive season in May-June 2019 will provide a temporary boost to vehicle sales, similar to the tax holiday in 2018. In the longer run, a stronger growth in vehicle sales will ultimately depend on higher wage growth and improvement in economic conditions to lift households’ confidence levels.

• The approval rate for loans on passenger cars stood at 67.0% in March, an increase of 3.4% from February and higher than the average rate of 59.6% in 2018.

Source: AmInvest Research - 24 May 2019