• We maintain our HOLD call on Sime Darby Berhad with an unchanged SOP-based FV of RM 2.64/share based on a FY21F PE of 11x for its motor segment.
   
• Last Friday, we attended a test drive event hosted by Sime Darby Berhad and Auto Bavaria Glenmarie for two specific models: (i) G20 BMW 330i M Sport and (ii) BMW X3 xDrive30i Luxury.

• The BMW 330i M Sport (1,998 cc) was initially launched in Malaysia as a singlevariant CBU model on 28th March 2019 priced at RM328.9K. With the recent commencement of its CKD operations in September 2019, the sports sedan is now assembled locally at its subsidiary, Inokom’s plant in Kulim. The CKD version will be RM40.0K cheaper at RM288.9K.

• As specifications and equipment list remained identical between the CBU and CKD version for the BMW 330i, we are mildly positive on the RM40.0K price reduction (approximately 12% lower from the CBU version). Even though it will assist in lifting buying interest for the model, we see its competitor, Mercedes’ pricing for C 300 CKD as more competitive at RM259.9K. We do not expect profitability margins to improve significantly with the commencement of the CKD. This is in view that the model’s pricing was mainly reduced through lower excise duties. Before the vehicle reaches the Inokom plant, a majority portion of it (except car seats and doors) has already been built-up either in Thailand or India.

• We were guided that Sime Darby Motor’s Auto Bavaria is responsible for approximately circa 50% of all BMW sales in Malaysia, with 40% of its models being the BMW 3-series. Local auto dealership competitors for BMW vehicles include Ingress Auto and Quill Automobiles.

• There will be a new launch of the G20 BMW 320i in 1H2020 next year in a single variant with a price tag of circa RM240.0K.

• The BMW X3 xDrive30i Luxury (1,998 cc), a 5-seater third-generation G01 sports utility vehicle (SUV) has been priced at RM 313.9K. Like the BMW 330i M Sport as explained above, the X3 is also a locally assembled at the same plant.

• Total YTD 8M19 BMW sales stood at 6.6K units (-18% YoY), compared to 8M18’s total of 8.0K due to pumped up numbers from the tax holidays in 2018.

• We maintain our sector view that foreign brands will continue to remain sluggish in 2019 as consumer sentiment remains weak on discretionary spending towards premium vehicles. We continue to witness a shift in consumer preferences towards cheaper and better value-for-money vehicles. National carmakers which are able to offer similar specifications at lower prices have been gaining traction in market share in terms of the TIV.

Source: AmInvest Research - 7 Oct 2019