- According to Datuk Seri Mustapha Mohamed, the Government is still studying a proposal to abolish the AP system.

- Under the 2010 NAP, in line with initial plans to abolish APs, importation of used vehicles will also no longer be allowed after 2015, whereas franchise APs will be terminated by December 2020. However, in the recent 2014 NAP review, Datuk Seri Mustapha announced that the plan is being relooked.

- Key reasons cited were the impact to Government revenue (about RM1bil collected from AP issuance over the past 3 years) and employment generated by the companies allocated APs.

- Since 2010, open AP recipients are charged RM10,000 per AP. The amount collected is then channelled to a fund to assist AP holders to undertake among others: (1) To secure distributorship/franchise rights and dealership of other makes of vehicles; (2) Expansion programs for authorized dealers; (3) Venturing into other automotive sub-sector or other businesses; (4) Upgrading show rooms and service centres; and (5) Participation in international seminars/motor shows/conferences/meetings or trade missions.

- Generally, the fund is to assist the AP holders to venture into other businesses - on the assumption that the AP system will be abolished by 2015. The change in plans now raises questions on the continuity of such charges being collected by the Government.

- There are currently 98 companies that are allocated open APs. The number has gone down significantly since 1987, whereby 156 companies out of 254 initially, has been withdrawn AP allocation due to misuse/abuse of APs and selling APs.

- Open APs are used to import used/”reconditioned” vehicles that are sold at discounts to new CBU imports. Therefore, to a certain extent, auto companies (i.e. official distributors and importers) see open AP holders as a threat.

- However, we see no impact from the development as there had always been uncertainty on execution of the AP abolishment, based on our chat with industry players and AP holders. More importantly, it is very unlikely that the market would have discounted such a possibility into current share prices.

- Berjaya Auto (BUY, FV: RM3.10/share) remains our top sector pick as the best proxy to the EEV program, aggressive new model introductions and potential acquisitive growth. APM (BUY, FV: RM7.20/share) meanwhile, rides on the expansion of Mazda sales volume as the latter is one of APM’s top 3 customers. 

Source: AmeSecurities