- MAA reported strong TIV numbers in March. The industry achieved sales volume of 58,919 units in March, which is 16% higher than February 2014’s TIV and 2% higher YoY.

- Year-to-date, TIV has reached 159,910 units, representing a 1.4% increase. Annualised (at 639,640), the reported TIV is still short of our 2013 forecast of 679,205 units and MAA’s forecast of 670,000.

- However, the 1Q13 numbers has to be taken in context with the short working months in January and February (due to CNY festivities). March 2014 TIV, if annualised, would translate to a full year of 707,028 units.

- On a sequential basis, Mazda outperformed the industry strongly, with sales of 918 units, or a 69% MoM increase (vs. industry: +16%). This reflects what we think could be:- (1) spillover deliveries from February (given the short working month) – BAuto’s sales network is dealership centric; and (2) a batch of 600-900 units imported CBU CX5 models to address the 6 months long waiting list.

- Our chat with management suggests possibilities of stronger numbers in April, based on indicative wholesales to its dealerships and also the gradual recovery in production of the CKD CX5.

- MAA expects overall TIV to be maintained at March’s level in April. Though we note that there has been a small uptick in hire purchase rates for certain banks, our recent meeting with Perodua suggests demand is still intact at this juncture.

- New model introductions (especially those that qualify as EEV models) are key sector catalysts in the near term. Among them include:- (1) CKD Mazda 3; (2) CKD Serena Hybrid; (3) New Perodua Viva; and (4) Proton Global Small Car.

- Honda’s recently launched new generation City, which selling price is now RM10,000 cheaper (starting at RM76K versus RM86K for the outgoing model) should support April TIV. The new City is likely to have been pre-qualified as an EEV model given Honda’s plans to locally assemble the Hybrid variant of the model.

- Our top pick is BAuto (BUY, FV: RM3.00/share) to ride on its margin expansion from a transition to a CKD business model, aggressive new model introductions, exposure to high growth markets in Thailand and Philippines, and as the best proxy to Malaysia’s EEV program at this juncture. Strong April TIV and outperformance in the upcoming 4QFY14 results are key catalysts in the near term. 

Source: AmeSecurities