Automobile sector
Maintain neutral: May’s total industry volume (TIV) rose 22% month-on-month (m-o-m) and 41% year-on-year (y-o-y), recording a new high after the tax holiday period in 2018 to 60,800 units. Cumulatively, for the first five months of 2019 (5M19) the TIV was up 13% y-o-y to 253,800 units compared with 225,100 units in 5M18. Year-to-date (YTD) TIV was within our forecast of 603,000 units for 2019, accounting for 42% of our full-year estimate.

 
The exceptionally robust sales in May were lifted by Hari Raya promotional campaigns, where dealerships throughout the country gave out attractive rebates, free gifts and other incentives to increase car sales. We should also expect to see decent June TIV sales figures (albeit lower than May’s) as there will be delayed car deliveries and last-minute bookings throughout the nation.

According to a recent local news report, Proton sold a total of 10,600 units in May, breaking the 10,000 mark in 46 months. This chalked up a whopping 51% m-o-m and 159% y-o-y growth for Proton. As at 5M19, Proton has sold a total of 35,900 units. However, we noticed that the sales of the X70 dropped slightly to 2,400 units. This is the first time that the famed sport utility vehicle has recorded a monthly sales volume lower than the 2,500 mark in 2019.

Proton’s splendid performance in May has placed the group as the runner-up in the market share for the month, behind the other national titan Perodua. Proton managed to capture 17% of the market share in May. We believe this was due to three reasons: i) the Hari Raya festive rebates and discounts; ii) the first full-month delivery of the new Persona and Iriz facelifts; and iii) a higher-than-expected sales from the Saga, raking in over 3,600 units for the month.

We believe that the national marques’ sales volume will continue to be robust and compelling throughout 2019. We reckon that there will be a radical change in the sector for the first time since 2014, where national marques’ market shares have comfortably surpassed that of the non-national marques.

The ongoing strong demand for Perodua’s Myvi and Axia, combined with Proton’s volume-oriented price-competitive models like Persona and Iriz, will continue to drive the local automobile sector in the short term. We will provide a more detailed breakdown on this once we receive May’s Malaysian Automotive Association statistics.

We look forward to the anticipated revised National Automotive Policy 2019 which is likely to be announced in the second quarter of 2019. The new policy will set the long-term direction of the automotive ecosystem and also provide more clarity on the development of the New National Car Project.

We have “buys” on Bermaz Auto Bhd, Pecca Group Bhd, MBM Resources Bhd and Tan Chong Motor Holdings Bhd. Our “hold” calls are on Sime Darby Bhd, DRB-Hicom Bhd and UMW Holdings Bhd while we are “underweight” on APM Automotive Holdings Bhd. — AmInvestment Bank, June 21