Investment Highlights

January 2020 TIV was down 22% MoM and 12% YoY to 42.7K units. We believe sales in January 2020 was affected by the shorter working month due to Chinese New Year holidays and market uncertainty following the announcement of the implementation of new excise duty regulations. Note that the Malaysian Automotive Association (MAA) has revised its 2020 TIV forecast to 607K from 612K units, having factored in economic and environmental considerations.

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

1) Perodua registered a total sales volume of 17.5K units (-5% MoM, -13% YoY) in January. The Aruz SUV sold a total of 1.0K units for the month. The 2020 Perodua Bezza has been officially launched in Malaysia and it is priced RM34.6K– RM50.0K in 4 variants. Perodua has introduced a sales volume target of 240.0K units for 2020.

2) Proton delivered 8.5K units (-23% MoM, +24% YoY) in January, including 1.4K units for the X70. Saga continued to be the mainstay, representing a total of 3.9K units (+72% YoY) for the month. The Persona also nearly doubled in sales with 2.1K units delivered in January. Proton successfully launched its X70 CKD on 13 February 2020 with a marginal price reduction for all model ranges. It is priced from RM94.8K to RM123.8K in 4 variants.

We note that Proton has introduced its sales volume target for 2020 at 132.0K units.

3) Honda sold a decent 6.1K units (-16% MoM, -19% YoY) in total sales in January. Honda’s market share of 14.2% for the month put it in third place behind national carmakers Proton and Perodua. The Honda Civic 2020 CKD facelift was launched on 26 February 2020 after orders were open for five months, pending the pricing approvals from the government. It is priced from RM114.0K to RM140.0K in 3 variants. Pre-facelift pricings were RM108.0K to RM129.0K.

4) Toyota sold 3.7K units (-55% MoM, +16% YoY) in January. The UMWH management highlighted that Toyota’s top three best-selling models for the year were the volume-driven Vios, Yaris and Hilux, comprising about 80% of its total sales. We continue to be cautious on Toyota’s outlook in CY2020 due to our expectations of fewer new passenger vehicle launches this year. We also anticipate competition to heighten in the passenger vehicle space with the expected launches 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’s posted a sales volume of 1.1K units (+22% MoM, -31% YoY) in January. The all-new Mazda CX-30 has been officially launched on 15 January 2020. It is a CBU from Japan based on the Mazda 3 platform and is priced from RM143K to RM173K in 3 variants. It is positioned between the CX-3 and CX-5 in terms of size/dimensions but shares the same pricing range as the latter.

The approval rate for loans on passenger cars stood at 53.8% in December, a decrease of 3.3% from November and lower than the average rate of 59.6% in 2018.

We continue to be optimistic on national car marques Proton and Perodua for 2020, 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.

We maintain our NEUTRAL stance on the auto sector with a TIV projection of 610K units for 2020. Our top picks for the sector are DRB-Hicom (FV: RM3.18) and MBM Resources (FV: RM5.54) as we expect Perodua and Proton to continue their strong showing in 2020, commanding pole position and runner up respectively in terms of TIV market share

Source: AmInvest Research - 3 Mar 2020