Highlights

• MAA reported weak numbers for April TIV with only 42.2k units (-6.7% yoy; -13.6% mom), dragged by continued cautious consumer sentiments (especially on big item purchase) as well as holding back of purchase in anticipation of new model launches. YTD, sales dropped by 18.8% yoy, due to high base effect as well as weak consumer sentiment. We cut our 2016 TIV assumption by 7.9% to 613.4k units (-8.0% yoy), as we now expect the weak trend to persist towards year end amid potential delay in new model launches.

Comment

• Perodua (UMW and MBM) still controlled the largest market share at 35.3% in April, despite lower sales of 14.9k units (- 15.3% yoy; -15.5% mom), due to weak demand for MyVi and Alza, as market structure trended down to Axia. Perodua has introduced new MyVi variants in order to upkeep its demand. New model launches by 2H16 are expected to improve Perodua sales.

• Proton (DRB & MBM) sales weakened to record low 4.5k units (-27.4% yoy; -19.1% mom) on weak consumer sentiments as well as holding back of purchases pending new model launches. However, the new launches are likely to face delays due to supply chain issues (new Perdana launch was delayed since Mar-Apr 2016).

• Within the foreign segment, Honda (DRB) remained the top with 6.0k sales (-9.1% yoy; -19.6% mom), supported by strong demand for HRV model. It is on track to achieve its target of 90k units for FY16, with upcoming new Civic and facelift Accord launches.

• Toyota (UMW) reclaimed 2nd spot with 4.1k units (-32.2% yoy; -5.3% mom). Despite new model launches of Hilux, Fortuner, Innova and upgraded Vios, its target of 85k sales for FY16 is still relatively tall to achieve.

• Followed by Nissan (TCM) with weak 3.1k sales (-1.6% yoy; -30.6% mom), post price hikes effective April.

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

• Underweight

Positives

• 1) Potential export to regional market, i.e. Malaysia as a hub; and 2) Implementation of Energy Efficient Policy.

Negatives

• 1) Tight bank lending rules; 2) Competitive pressure on margins; 3) RM depreciation; and 4) Weakened consumer sentiment.

Valuation

Source: Hong Leong Investment Bank Research - 19 May 2016