- Perodua launched a new variant for its MyVi model recently. This is the cheapest variant being offered for the model. The new MyVi XT is priced between RM41.9K–RM45.4K compared to RM44.9K–RM48.4K (6.2% to 6.7% cheaper) for the 1.3 litre SE variant.

- However, the XT essentially replaces the old 1.3 litre “Standard” variant of the MyVi and is priced exactly the same with the outgoing model, but with an estimated RM1,600 worth of additional equipments (such as a new interior trim, 14” alloy wheels, bluetooth), or 3.5%-3.8% in incremental equipment value vs. the old model. Notably, a similar strategy was employed when Perodua launched the MyVi SE (which replaced the 1.3 litre “Premium” variant); it introduced higher spec variants and 3-year free maintenance at the same price as the outgoing models.

- Perodua aims to launch its EEV model in 2H14. We do not think that much of the EEV incentives will revolve around duty rebates as Perodua models are already highly localised (circa 90%). Vendor assistance, which can then be passed on to Perodua in terms of cheaper supplies could be a possibility, besides R&D grants for the model itself and production line development.

- Perodua has yet to disclose which exactly the EEV model is. However, we note that the Viva is long due for a replacement (scheduled for launch in 2H14) and could be based on the Daihatsu Ayla, which qualified as Indonesia’s first LCGC model (priced at IDR76mil or RM21,150). The Ayla is powered by a 1-litre engine and entails fuel consumption of 4.5litre/100km (22km/litre), which qualifies it for Malaysia’s EEV program. The current generation 1-litre Viva is priced between RM34.8K – RM44.8K.

- While it is difficult to quantify at this juncture, we are generally positive on these developments as:- (1) EEV incentives that it might gain could be structurally positive in improving Perodua’s costs and the positioning of its models in the market; and (2) replacement of the entry level Viva model will provide a kicker to volumes in 2H14.

- We have a BUY on MBM (FV: RM4.20/share), which has the best leverage on Perodua’s earnings and is estimated to account for circa 90% of MBM’s bottomline. MBM has a 22.6% stake in Perodua. UMW (HOLD, FV: RM13.10/share) is another play on Perodua’s earnings (via its 38% stake in the latter), albeit much more diluted, with Perodua accounting for an estimated 24% of bottomline. Furthermore, MBM offers cheaper access to Perodua, at implied valuation of 8x FY14F earnings (UMW FY14F: 13x PE).

- MBM’s auto parts unit is also a beneficiary via Hirotako (which produces airbags and seat belts) as well as OMI, which produces alloy and steel wheels for Perodua. APM (BUY, FV: RM7.20/share) is another potential beneficiary of these new introductions. 

Source: AmeSecurities