Investment Highlights

• November 2019 TIV was down 2% MoM but up 9% YoY to 52.6K units. Cumulatively, 11M19 TIV was marginally down 0.2% to 549.5K units from 550.4K units in 11M18.

• We note the following for major car marques’ in November’s sales figures:

1) Perodua registered a total sales volume of 20.4K units (-10% MoM, -3% YoY). The Aruz SUV continued to be the most popular SUV in Malaysia with 3.0K units sold for the month. YTD 11M19, 27.4K units of the Aruz have been sold.

In 11M19, 222.0K units of Perodua have been sold and it is well on track at 94.5% to achieve its full-year 2019 sales target of 235.0K units.

2) Proton delivered 9.6K units (+1% MoM, +100% YoY) in November, including 2.2K units sold for the X70. We suspect that the rise in the sales volume number for the month was a result of the group’s aggressive end-of-year promotional activities. The total 11M19 sales for Proton stood at 89.1K units, recording an impressive YoY growth of 51%. Proton maintained its runner-up position in terms of YTD market share at 16.2%, ahead of Honda’s 14.2%. A total of 4.1K units of Proton Saga were delivered in November with 34.4K units sold YTD for the A-segment sedan. The group mentioned that it is looking to increase its production capacity for the Saga as they look forward to delivering more units of the aforementioned model in 2020.

3) Honda sold a decent 6.7K units (+5% MoM, -6% YoY) in total sales for the month. YTD, Honda sold a total of 78.2K units compared with 94.3K units in 11M18. Honda’s YTD market share of 14.2% anchored its position in the third place behind national carmakers Proton and Perodua. The Honda Civic 2019 facelift is currently open for bookings nationwide with a tentative launch in 4QCY2019. It will be priced from RM108.2K to RM128.7K.

4) Toyota sold 7.0K units (+7% MoM, +81% YoY) in November. The UMWH management highlighted that Toyota’s top three best-selling models were the volume-driven Vios, Yaris and Hilux, comprising about 74% of its total sales for the month. We continue to be cautious on Toyota’s outlook in CY2020F due to our expectations of fewer new launches next year while we anticipate competition to heighten in the passenger vehicle space with the expected launch of the all-new Nissan N18 Almera and Honda City 2020. It is important to note that these two models are direct competitors to the Toyota Vios.

5) Mazda sold 0.8K units in November (-20% MoM, -57% YoY) in November. We think that the monthly sales volume would recover back to its 1.0K level for the upcoming months, backed by the recent launch of its CX-5 facelift and the all-new CX-8. Upcoming launches this year for Mazda include the CX-30 and possibly the CX-3 CBU. We believe that this will be supportive of Bermaz’s earnings in 2HFY20. The CX-5 is priced from RM134.0K to RM178.0K in five variants while the CX-8 is priced from RM176.0K to RM214.0K in four variants.

• The approval rate for loans on passenger cars slid to 59.0% in October, a decrease of 4.3% from September and slightly lower than the average rate of 59.6% in 2018.

• We continue to be optimistic on the national car marques Proton and Perodua while we stay cautious on the foreign and premium car brands as consumers are more careful and conservative with their discretionary spending, indirectly benefitting cheaper and better value-for-money cars.

• Our top picks for the sector are DRB-Hicom (FV: RM3.18) and MBM Resources (FV: RM5.54) as they ride on the strong sales of Proton and Perodua vehicles which command the bulk of the market share in terms of TIV sales.

Source: AmInvest Research - 23 Dec 2019