AmInvestment expects extension of SST waiver to boost auto TIV to 600,000 in 2021

TheEdge Mon, Jan 04, 2021 11:44am - 3 years View Original


KUALA LUMPUR (Jan 4): AmInvestment Bank has revised its earnings projections and fair values for the auto companies under its coverage as it expects the government’s decision to continue waiving the sales and services tax (SST) for another six months to be positive for the local automotive sector.

“We maintain our 'overweight' stance on the auto sector with a 40,000 increase in total industry volume (TIV) projection to 600,000 units for 2021, an increase of 11% from our previous estimate of 560,000 units,” it said in a research note today.

Last week, the government said it will extend the 100% and 50% SST exemption on completely knocked down locally assembled and completely built up car models respectively for another six months from Jan 1, 2021 until June 30, 2021 with the aim of revitalizing the local auto sector.

AmInvestment Bank noted that the announcement came in as a positive surprise given that the government had initially rejected the Malaysian Automotive Association’s request for an extension of the SST exemption.

“From our checks, passenger vehicle prices will continue to be 1% to 6% lower across the board (depending on car model), which we believe will be benefitting to all auto players in our coverage in sustaining strong profitability in the next two quarters ending 1HCY21 (first half of calendar year 2021). In addition, we believe that the current low interest rate environment will prevail for the entire 2021 — which will be supportive of vehicle purchases throughout the year,” it said.

The research unit of the bank has therefore increased its fair value on MBM Resources Bhd to RM4.51 per share and maintains it "buy" recommendation. It also increased the company’s FY21 net profit forecast by 4% to reflect higher Perodua sales volume for the year. MBM Resources remains its sector’s top pick.

AmInvestment Bank maintained its "buy" call on DRB-Hicom Bhd with a higher fair value of RM2.55 per share, as net profit for FY21 is forecasted to increase 3% to reflect higher Proton and Honda sales volume for the year.

It also maintained its "buy" call for Sime Darby Bhd with an unchanged fair value of RM2.87, while FY21 net profit is forecasted to increase 1% to reflect higher BMW sales volume in the Malaysia market.

Bermaz Auto Bhd also has a "buy" call with a higher fair value of RM1.74 a share while its FY21 and FY22 net profit is forecasted to increase by 3% and 2% respectively to reflect higher Mazda sales volume for the group’s domestic market.

Meanwhile, AmInvestment Bank has upgraded UMW Holdings Bhd from a "buy" to a "hold" call with a higher fair value of RM3.66. Its FY21 net profit has been forecasted to increase 9% to reflect higher Toyota sales volume and higher associate earnings from 38%-owned Perodua.

Pecca Group Bhd still has a "hold" call with a higher fair value of RM1.58 per share while its FY21 net profit is forecasted to increase by 9% to reflect higher OEM sales volume in the domestic market, while Tan Chong Motors Holdings Bhd has an "underweight" recommendation with an unchanged fair value of 67 sen per share.

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






Related Stocks

BAUTO 2.390
DRBHCOM 1.480
MBMR 4.640
PECCA 1.360
SIME 2.600
UMW 4.970

Comments

Login to comment.