Autos - March-ing towards GST
Recommendation: Neutral
To our surprise, March was a better-than-expected month for new vehicle sales, mainly due to aggressive pre-GST promotions. TIV expanded 33.6% mom and 14.2% yoy to 67,314 units, leading to 5.3% yoy growth in cumulative TIV to 168,306 units for 3M15. However, we do not believe the strong performance is sustainable, as we expect the GST, implemented in April, to have an adverse impact on consumer sentiment, affecting car sales. We maintain our flat TIV forecast of 670,000 units for 2015 and remain Neutral on the sector. Berjaya Auto remains as our sector top pick.
What Happened
The Malaysian Automotive Association (MAA) released its March 2015 industry sales data today. Total volume for new vehicle sales rose by 33.6% mom and 14.2% yoy to 67,314 units. Cumulatively, the total industry volume (TIV) for 3M15 increased 5.3% yoy to 168,306 units. On a mom basis, the non-national segment registered higher growth in Mar 2015, with a 45.6% mom jump in volume to 34,289 units, compared with a 23.0% mom increase for the national carmakers. However, the national brands had a better growth rate in 3M15, expanding 10.5% yoy to 84,835 units, compared with a 0.4% yoy increase in volume to 83,471 units for the foreign brands.
What We Think
We were slightly surprised by the Mar 2015 figure, as we had expected a weaker growth. March was the last month before GST implementation, and we believe the strong sales were mainly due to carmakers offering huge pre-GST promotions which resulted in consumers rushing to buy new vehicles before GST kicks in. We believe that notwithstanding the prevailing anticipation of lower car prices post-GST (and price for most cars did drop), carmakers offered huge discounts and rebates pre-GST due to the concern that potential car buyers would withhold their purchases post-GST due to the expected price increases for other goods and services which would further weaken the already frail consumer sentiment. However, we do not expect the strong sales to be sustainable post-GST, as we anticipate potential car buyers to take a wait-and-see approach to gauge the impact of GST on their spending power.
What You Should Do
We advise investors to continue to accumulate the stocks of Berjaya Auto, the only auto stock that has our Add call, and is our top pick for the sector.
Source: CIMB Daybreak - 23 April 2015
Recommendation: Neutral
To our surprise, March was a better-than-expected month for new vehicle sales, mainly due to aggressive pre-GST promotions. TIV expanded 33.6% mom and 14.2% yoy to 67,314 units, leading to 5.3% yoy growth in cumulative TIV to 168,306 units for 3M15. However, we do not believe the strong performance is sustainable, as we expect the GST, implemented in April, to have an adverse impact on consumer sentiment, affecting car sales. We maintain our flat TIV forecast of 670,000 units for 2015 and remain Neutral on the sector. Berjaya Auto remains as our sector top pick.
What Happened
The Malaysian Automotive Association (MAA) released its March 2015 industry sales data today. Total volume for new vehicle sales rose by 33.6% mom and 14.2% yoy to 67,314 units. Cumulatively, the total industry volume (TIV) for 3M15 increased 5.3% yoy to 168,306 units. On a mom basis, the non-national segment registered higher growth in Mar 2015, with a 45.6% mom jump in volume to 34,289 units, compared with a 23.0% mom increase for the national carmakers. However, the national brands had a better growth rate in 3M15, expanding 10.5% yoy to 84,835 units, compared with a 0.4% yoy increase in volume to 83,471 units for the foreign brands.
What We Think
We were slightly surprised by the Mar 2015 figure, as we had expected a weaker growth. March was the last month before GST implementation, and we believe the strong sales were mainly due to carmakers offering huge pre-GST promotions which resulted in consumers rushing to buy new vehicles before GST kicks in. We believe that notwithstanding the prevailing anticipation of lower car prices post-GST (and price for most cars did drop), carmakers offered huge discounts and rebates pre-GST due to the concern that potential car buyers would withhold their purchases post-GST due to the expected price increases for other goods and services which would further weaken the already frail consumer sentiment. However, we do not expect the strong sales to be sustainable post-GST, as we anticipate potential car buyers to take a wait-and-see approach to gauge the impact of GST on their spending power.
What You Should Do
We advise investors to continue to accumulate the stocks of Berjaya Auto, the only auto stock that has our Add call, and is our top pick for the sector.
Source: CIMB Daybreak - 23 April 2015
