Investment Highlights

• May 2019 TIV was up 22% MoM and 41% YoY, recording a new high after the tax holiday period in 2018 to 60.8K units. Cumulatively, 5M19 TIV was up 13% YoY to 253.8K units compared with 225.1K units in 5M18. YTD, TIV was within our forecast of 603K units for 2019, accounting for 42% of our full-year estimate. We took note that the compelling sales figure was lifted by Hari Raya promotional campaigns by dealerships throughout the nation.

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

1) Perodua registered a rebound in total sales volume to 22.9K units (+4% MoM, +4% YoY). Cumulatively YTD, Perodua has sold 105.7K units (46% of year-end target) and is well on track to achieve its target of 231.0K units. The Aruz delivered a total of 3.2K units for the month, the highest since its launch early this year. The UMW group guided that Perodua has fulfilled 52% of the 25.0K bookings for the SUV since its introduction, with 13.0K units delivered. UMW also mentioned that Perodua is working closely with its suppliers to further narrow the gap between orders and deliveries. The deliveries of Aruz were increased to an average of 110 units daily from 100 units previously.

2) Proton sold a splendid 10.6K units for in May 2019 (+51% MoM, +159% YoY), breaching the 10.0K mark in 46 months. This was mainly due the impressive sales of passenger vehicles of 7.7K units (3.0K units of the Persona, 0.9K units of the Iriz, 3.6K units of the Saga). We believe that this was due to three reasons: (1) the Hari Raya festive rebates and discounts; (2) the first full-month delivery of the new Persona and Iriz facelifts; and (3) higher-than-expected sales from the Saga. However, sales of the popular X70 declined slightly to 2.4K units in May. This is the first time that the SUV has recorded a lower monthly sales volume than the 2.5K mark in 2019.

3) Honda also recorded strong numbers for the month, delivering a total of 10.5K units (+70% MoM, +31% YoY) in May 2019. This was backed by improved sales figures in all of the group’s major vehicle segments. Honda sold a total of 6.6K units of passenger cars (+105% MoM) and 2.9K units of SUVs (+35% MoM), benefitting heavily from the Hari Raya promotional campaigns. On a cumulative basis, Honda has sold a total of 38.9K units and is still standing firm at second place in terms of market share at 15%, only behind Perodua of 42%.

4) Toyota registered a total of 6.8K units (+25% MoM, +238% YoY) in May. The impressive YoY growth was due to consumers holding back their purchases last year in anticipation of the three-month tax holiday. The UMW management guided that the best-selling models for May was the Vios, Yaris and Hilux, which accounted for more than 75% of Toyota’s total sales. In addition, we also took note of the launch of the Avanza facelift in mid-May. The Avanza is a CBU model from Indonesia and its price ranges from RM80.9K to RM88.9K. Toyota’s YTD market share stood at 10.2% and is still trailing behind Honda by a significant margin. This goes to show that the volume increment needs to be much stronger in order to win back some of the market share from Honda. We believe that Toyota will be focusing heavily on volumeoriented models such as the Vios and Yaris to achieve its ambitious sales volume growth of 14% for 2019.

5) Mazda was the only drag throughout May among all major marques, registering total sales of 1.1K units (-19% MoM, +72% YoY). However unlike the other marques, Mazda did not hand out any rebates or promotional discounts during the Hari Raya festive season. We expect sales to improve ahead as there will be upcoming launches this year for the group; namely the M3, CX-8 and CX-30 with tentative launches in July, September and December respectively.

• As there will be delayed car deliveries and last-minute bookings throughout the nation in May, we believe June 2019 will also register decent sales figures (albeit lower than that in May 2019) but slower YoY growth with the absence of the tax holidays in 2018. We also reckon that the national marques’ sales volume will continue to be robust and compelling throughout 2019 on the back of more affordable alternatives, offering more value for money.

• The approval rate for loans on passenger cars stood at 61.6% in April, a decrease of 5.4% from March but still higher than the average rate of 59.6% in 2018.

Source: AmInvest Research - 24 Jun 2019