• July 2019 TIV rose 20% MoM but dipped 26% YoY to 50.9K units. The YoY decrease in July this year was due to a high base from 2018’s tax holidays. Cumulatively, 7M19 TIV was down 3% to 347.2K units from 358.1K units in 7M18. YTD TIV was within our forecast of 603K units for 2019, accounting for 58% of our full-year estimates.

• According to a media report recently, Proton registered a total sales volume of 8.6K units in July, translating to a market share of 16.5% for the month and approximately 15% on a YTD basis. The total 7M19 sales for Proton stood at 52.2K units, recording a growth of 48%YoY.

• While we have yet to receive the official MAA numbers for the other brands and the total TIV breakdown, it is highly likely that Proton has ousted Honda and claimed its position as the runner-up in YTD market share. With the sustained momentum and deliveries from volume-oriented models like the Persona and Iriz, we strongly believe that Proton will finish second by the end of 2019, behind the national titan Perodua.

• On the other hand, Perodua posted a total sales volume of 19.1K units in July (+19% MoM, -20% YoY). The Aruz delivered about 2.9K units for the month, higher than the usual 2.5K level, thanks to an improved production process and higher daily deliveries. This has led the Aruz to be the most popular SUV in Malaysia. Perodua is maintaining its sales target of 235.0K units for 2019. According to the UMW Group, the waiting time for the Aruz has been reduced to 1–1.5 months from 2–2.5 months. In 7M19, 18.0K units of the Aruz have been sold.

• We strongly believe that the national marques’ sales volume will continue to be the key driver of the local automotive space. With the recent launch of the Saga, we believe that Proton will be able to maintain its sales volume momentum through the remaining months of the year. We also look forward to the upcoming X70 CKD in November, where DRB-Hicom’s management has guided that there will be a price reduction for the popular SUV.

• We have BUYs on Bermaz Auto (BAuto), DRB-Hicom, MBM Resources, Pecca Group, Sime Darby and Tan Chong Motor while we are UNDERWEIGHT on APM Automotive.

• We are now upgrading the automobile sector to OVERWEIGHT based on our recent upgrade on Sime Darby to BUY. We believe that the stock’s valuation is undemanding at current levels and we are now recommending a BUY on weakness of the share price. We now have 6 BUYs out of the 8 stocks under our automobile sector coverage.

Source: AmInvest Research - 20 Aug 2019