BUSINESS

AMINVESTMENT MAINTAINS 'OVERWEIGHT' ON AUTOMOBILE SECTOR, PROJECTS 565K TIV FOR 2020

06/07/2020 01:05 PM

KUALA LUMPUR, July 6 -- AmInvestment Bank has maintained its ‘overweight’ call on the automobile sector, with a total industry volume (TIV) projection of 565,000 units for 2020.

In a note, analyst Jeremie Yap said TIV in the second half of this year would be supported by improved performances across the board for all major automakers with the implementation of the short-term National Economic Recovery Plan (Penjana), entailing a 100 per cent and 50 per cent sales tax (SST) exemption on locally-assembled (CKD) and fully imported (CBU) car models respectively from June 15 until Dec 31, 2020.

“Going into 2H2020, we are expecting a strong recovery over the next six months as the number of domestic COVID-19 new cases is easing and most businesses have resumed operations.

“The government has also relaxed the movement control order (MCO), where all dealerships, showrooms and Road Transport Department outlets are now able to take in booking orders and registrations for new vehicles,” Yap said.

Yap said the SST exemptions would result in reduced car prices of between 1.1 per cent and 6.5 per cent for cars across the board for all automakers, which is seen as a much-needed shot in the arm for local vehicle sales, similar to the three-month tax holiday in June-August 2018.

In 2018, he said the zero-GST “tax holiday” resulted in a cut in car prices of between three per cent and five per cent across the board, significantly spurring demand for new cars with a total sale of 198,500 units for the June-August 2018 period (up 42 per cent quarter-on-quarter, up 32 per cent year-on-year).

He said Proton and Perodua would benefit from the SST exemption stimulus more than the others given that the prices of their product offerings would be even more affordable post-SST exemption as their entire line-up are locally assembled CKDs.

“We strongly believe that Proton and Perodua will continue to lead the auto sector in 2H2020 due to their more attractive pricings for their line-ups and value propositions compared to their peers (i.e. X70 vs. X-Trail/CR-V; Aruz vs. BR-V).

“With that, we maintain BUYs on DRB-Hicom (fair value: RM2.49) and MBM Resources (fair value: RM4.62) as they are proxies to Proton and Perodua’s performances in the auto sector,” he added.

-- BERNAMA

 

 


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