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Saturday, July 26, 2014

Maybank IB ‘overweight’ on auto sector


MAYBANK Investment Bank Bhd (Maybank IB) is keeping its “overweight” stance on the automotive sector, based on a bottom-up stock call approach.

It said its 2014 total industry volume (TIV) forecast of 675,000 units is unchanged.

“We expect the TIV momentum to slow down in August and September, post-Hari Raya sales campaign, before picking up again from October onwards on year-end sales campaign by car distributors,” it said in its note.

The recent increase in the Overnight Policy Rate by 25 basis points could affect vehicles sales negatively, especially the A-segment market; for example, Proton Saga and Perodua Viva in the second half of this year (2H14).

“We caution that the strong TIV sales in June to July will be offset by margin erosion, as price discounting will continue in exchange for market share,” Maybank IB said.

“In terms of market share, in the first half of 2014, Honda and Toyota led with 4.2ppts and 1.5ppts year-on-year gain, respectively, while the national marques continue to lose market share in a competitive environment,” it said.

Its top pick is Berjaya Auto Bhd, with potential upside to its earnings forecasts as it rides on strong TIV growth in the Philippines and the imminent launch of the B-segment Mazda2.

“We continue to like UMW Holdings Bhd and MBM Resources Bhd for their undemanding valuations and exposure to Perodua, which is ramping up production for its new model in 2H14 for domestic and export markets,” it said.

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