PETGAS (6033) - Petronas Gas - Stable year ahead
Target RM27.11 (Stock Rating: ADD)
There were no major surprises from PetGas’s 4Q14 results conference call aside from clarification on its deferred tax assets (DTA). Moving forward, we expect PetGas's earnings and cashflows to remain stable, which will translate to consistent dividend payouts. Following the clarification on its DTA and associate earnings, we maintain our earnings forecasts for FY15 onwards. Our SOP-based target price of RM27.11 is unchanged, as is our Add call. We think the stock will attract investor interest during the current weak market environment due to the company’s highly stable earnings and cashflows.
We maintain our Neutral call on the sector, with a flat total industry volume (TIV) forecast of 670,000 units for 2015. Berjaya Auto (BAuto) is our only Add call and stays as our top pick for the sector. It has the best growth trajectory among the auto stocks under our coverage.
2014: year of the foreigners
2014 marked the year the foreign brands overtook the national brands in overall market share, by taking a 53.3% share of the market. This was mainly due to the good performance of the two biggest foreign brands, Toyota and Honda. Although not entirely unsatisfactory, 2014 turned out to be a somewhat challenging year for the auto industry, with the TIV growing 1.6% yoy to 666,465 units. This was above our initial forecast of 655,000 units, but was largely in line with our revised forecast of 670,000 units. On share price movements, BAuto was the best performing stock, with its share price surging 100%, while Tan Chong was the worst, tumbling 47.0% in 2014.
A bumpy 2015 ahead
We expect 2015 to be another challenging year for the industry, with weak consumer sentiment and uncertainties surrounding the introduction of GST the main hurdles to overall sales growth. While the GST will not have a direct impact, as we expect the car prices to remain relatively unchanged, due to the different calculation methods of the GST (6% based on car selling price) against the sales tax (10% based on the cost of the car), the expected rise in prices of other goods and services will cause consumers to be more cautious in their spending and withhold big ticket item purchases. As such, we expect a flat TIV growth this year, with the foreign brands continuing to hold the lead.
Be selective
We expect BAuto to continue to outperform its peers in sales volume and share price due to various new Mazda model launches planned for 2015, and its exposure to the fast-growing Philippines market.
Source: CIMB Daybreak - 23 February 2015
Target RM27.11 (Stock Rating: ADD)
There were no major surprises from PetGas’s 4Q14 results conference call aside from clarification on its deferred tax assets (DTA). Moving forward, we expect PetGas's earnings and cashflows to remain stable, which will translate to consistent dividend payouts. Following the clarification on its DTA and associate earnings, we maintain our earnings forecasts for FY15 onwards. Our SOP-based target price of RM27.11 is unchanged, as is our Add call. We think the stock will attract investor interest during the current weak market environment due to the company’s highly stable earnings and cashflows.
We maintain our Neutral call on the sector, with a flat total industry volume (TIV) forecast of 670,000 units for 2015. Berjaya Auto (BAuto) is our only Add call and stays as our top pick for the sector. It has the best growth trajectory among the auto stocks under our coverage.
2014: year of the foreigners
2014 marked the year the foreign brands overtook the national brands in overall market share, by taking a 53.3% share of the market. This was mainly due to the good performance of the two biggest foreign brands, Toyota and Honda. Although not entirely unsatisfactory, 2014 turned out to be a somewhat challenging year for the auto industry, with the TIV growing 1.6% yoy to 666,465 units. This was above our initial forecast of 655,000 units, but was largely in line with our revised forecast of 670,000 units. On share price movements, BAuto was the best performing stock, with its share price surging 100%, while Tan Chong was the worst, tumbling 47.0% in 2014.
A bumpy 2015 ahead
We expect 2015 to be another challenging year for the industry, with weak consumer sentiment and uncertainties surrounding the introduction of GST the main hurdles to overall sales growth. While the GST will not have a direct impact, as we expect the car prices to remain relatively unchanged, due to the different calculation methods of the GST (6% based on car selling price) against the sales tax (10% based on the cost of the car), the expected rise in prices of other goods and services will cause consumers to be more cautious in their spending and withhold big ticket item purchases. As such, we expect a flat TIV growth this year, with the foreign brands continuing to hold the lead.
Be selective
We expect BAuto to continue to outperform its peers in sales volume and share price due to various new Mazda model launches planned for 2015, and its exposure to the fast-growing Philippines market.
Source: CIMB Daybreak - 23 February 2015
