PETALING JAYA: A potential quarter-on-quarter (q-o-q) drop in fourth-quarter 2020 (Q4’20) automotive total industry volume (TIV) could happen in view of weaker consumer sentiment following the implementation of conditional movement control order (CMCO) in certain areas and the ending of the loan moratorium, according to CGS-CIMB.
September TIV surged to an impressive 56,444 units, up 7% month on month and 26% year on year. This brought Q3’20 TIV up 2.5 times qoq to 166,796 units, driven by sales tax waiver under Penjana (National Economic Recovery Plan).
Nevertheless, TIV in the first nine months fell 23% year on year due to impact from the implementation of the movement control order.
CGS-CIMB pointed out that the Malaysian Automotive Association is keeping its 2020 TIV forecast of 470,000 in view of a weaker consumer sentiment in Q4’20 following the implementation of CMCO amid rising in Covid-19 cases and the end of the loan moratorium period in September.
“Our 500,000 2020 TIV forecast also implies a 159,000 TIV in Q4’20 (-5% q-o-q). Nevertheless, we see recent key launches such as Honda City and Nissan Almera could help to drive TIV in Q4’20. Moreover upcoming launches, such as the Proton X50 which have received over 20,000 bookings since mid-September, will be major drivers for TIV in Q4’20.
“Meanwhile, potential sales tax holiday extension, and delay in the implementation of the open market value methodology for vehicles in the upcoming Budget 2021 announcement could help to retain the TIV growth momentum into 2021,” the research house said in a report yesterday.
It reiterated its neutral rating on Malaysia’s auto sector and expects stronger auto sector earnings delivery quarter on quarter in Q3’20 driven by recovery in sales volume on the back of the sales tax holiday.
“The sector trades at 0.8 times 2020 price-to-book value, in line with its five-year historical mean. We think valuations are reflective of improving sector earnings prospects in H2’20. Sime Darby is our top pick due to its diversified earnings base, attractive recovery prospects in China and potential for higher dividends.”
AmInvestment Bank, however, has an overweight call on the sector and expects the strong sales volume momentum to be sustained in Q4’20, bolstered by the implementation of the sales and service tax (SST) holiday from June 15 until Dec 31, 2020.
“We believe that the SST exemption will continue to spur buying interest for passenger vehicles, especially the national brands Proton and Perodua.”
It maintained its overweight stance on the auto sector with an unchanged TIV projection of 500,000 units for 2020.
It noted that Perodua registered a record high total sales volume of 25,000 units (+47% year on year) in September, while Proton delivered 11,900 units (+37% year on year) in the same month.
“We expect the X70 and Proton’s mainstay Persona, Iriz, Exora and Saga models to continue doing well in Q4’20 as these entry-level models are even more affordably priced and offer better value-for-money now with the price reductions from SST exemptions.”
The automotive sector’s September TIV surged to an impressive 56,444 units, up 7% month on month. – BERNAMAPIX
