Highlights

• MAA’s statistics showed a rebound of +13.4% mom to 51.3k sales in May, after a disappointed April month due to the implementation of GST. However, the TIV remained weak given a drop of 8.4% yoy, on the back of muted consumer sentiments. YTD, TIV declined by 3.6% yoy to 264.7k units. We maintained our flat TIV growth projection at 663k units for 2015 as we expect lower base effect and normalizing consumer sentiment by year end.

Comment

• Perodua (UMW and MBM) maintained its top spot at 17.3k units (+7.4% yoy; -1.7% mom) with 33.7% market share in May. The demand for Axia remained strong, achieving 119k orders (75k units delivered by end May). YTD, Perodua achieved 92k sales (+18.5% yoy), on track to meet its targeted 208k units for 2015.

• Proton (DRB) regained second spot with 8.3k units (-18.4% yoy; +66.6% mom) and 16.2% market share in May. YTD, Proton achieved 40.9k sales (-22.7% yoy) indicating weak demand for new model Iriz. Proton has entered into MOU with Suzuki for future model development targeting A-B segment market.

• Toyota (UMW) sales improved to 7.5k units (-7.3% yoy; +25.1% mom) after launch of aggressive campaigns (offering rebates up to RM6k) in bid to boost sales volume. YTD, Toyota sales was 29.8k units, behind its targeted 95k sales for 2015.

• Honda (DRB) sales remained healthy with 6.2k units (-15.5% yoy; -5.2% mom), but dropped to second spot within the foreign segment. YTD, Honda achieved 34.9k sales (+16.8% yoy) vs. targeted 85k sales for 2015.

• Nissan (TCM) also reported sustainable sales at 3.4k units (+6.6% yoy; +6.9% mom), retaining third spot within foreign market. YTD, Nissan achieved 20.1k sales vs. targeted 45k sales for 2015.

• Other marques sales remained relatively weak in May given combined sales of 8.6k units (-22.5% yoy; +23.9% mom), with some exceptions such as Merc (DRB & C&C) and Mazda (BAuto).

Risks

• Prolonged tightening of banks’ HP rules .
• Slowdown in the Malaysian economy.
• Global automotive supply chain disruption.
• Sudden jump in fuel prices and interest rate.

Rating

• Neutral

Positives

• Potential export to regional market, i.e. Malaysia as a hub; and
• Implementation of Energy Efficient Policy.

Negatives

• Tightening of bank lending rules and rise in inflation;
• Instability of global automotive supply chain; and
• Depreciation of RM.

Valuation

• We maintained Neutral stance on the Automotive sector, with MBM (TP: RM4.28) as our Top Pick.

Source: Hong Leong Investment Bank Research - 22 Jun 2015