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Tiv Still Drifting Down

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Losing speed. The persistent weakness in TIV which extended into …

Losing speed. The persistent weakness in TIV which extended into
Apr, reaffirms our depressing view of the sector. Overall, we expect
2009’s TIV to contract 15-20% YoY. An effective NAP is essential to
reverse the slide. Until then, the auto sector remains an Underweight.
TIV continues to drift lower. Apr’s TIV of 41,135 units continued to
slide, down 7% MoM and 18% YoY. The sequential drop in vehicle
sales was greater on national marques (-10% MoM) vis-à-vis nonnationals
(-3% MoM). Perodua suffered the biggest drop in sales (-14%
MoM) and market share (-2.5% MoM) but was still capable of retaining
its No.1 status in the industry with a 30% market share.
YTD’s TIV down 12% YoY. Other major marques – Toyota, Proton and
Honda too reported weaker sales (-3%, -4%, -12% MoM respectively).
Only Nissan (+2% MoM) showed a 3% rise in sales, spurred on by its
MPV Grand Livina model (+9%). YTD, TIV fell 12% YoY to 159,816
units, accounting for 35% of our estimates of 438,000-465,000 units.
We expect TIV to contract 15-20% for 2009, as the sector continues
to suffer from an absence of new model launches and a stricter
financing environment. Reject rates for Proton’s applicants remain high
whilst the 85-100bps hike in Hire Purchase (HP) rates on non-national
cars will further dampen sales.
A good NAP is needed to wake the sector up. The National
Automotive Policy (NAP), which will be revealed by 3Q09, needs to
boldly address among others: (i) consolidation of national marques and
vendors, and (ii) issues on Approved Permits (APs). A pro-active
guideline will help shape the sluggish sector. Until then, we maintain
our Underweight call, with Sell calls on Proton and Tan Chong.


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  • 1. Equity Research PP11072/03/2010 (023549) Sector Update 20 May 2009 TIV still drifting down; Maintain Autos Underweight. Underweight (unchanged) Losing speed. The persistent weakness in TIV which extended into Wong Chew Hann, CA Apr, reaffirms our depressing view of the sector. Overall, we expect wchewh@maybank-ib.com 2009’s TIV to contract 15-20% YoY. An effective NAP is essential to (603) 2297 8688 reverse the slide. Until then, the auto sector remains an Underweight. TIV continues to drift lower. Apr’s TIV of 41,135 units continued to Snapshot of auto sales data slide, down 7% MoM and 18% YoY. The sequential drop in vehicle Apr 09 % chg % chg YTD % chg (unit) MoM YoY (unit) YoY sales was greater on national marques (-10% MoM) vis-à-vis non- nationals (-3% MoM). Perodua suffered the biggest drop in sales (-14% TIV 41,135 -6.9 -18.2 159,816 -11.8 MoM) and market share (-2.5% MoM) but was still capable of retaining Passenger 37,259 -6.8 -7.2 144,852 -0.4 its No.1 status in the industry with a 30% market share. Commercial 3,876 -8.1 -61.8 14,964 -58.1 YTD’s TIV down 12% YoY. Other major marques – Toyota, Proton and National 22,075 -9.9 -24.0 89,854 -13.5 Honda too reported weaker sales (-3%, -4%, -12% MoM respectively). Non-national 19,060 -3.3 -10.3 69,962 -9.5 Only Nissan (+2% MoM) showed a 3% rise in sales, spurred on by its MPV Grand Livina model (+9%). YTD, TIV fell 12% YoY to 159,816 Marque units, accounting for 35% of our estimates of 438,000-465,000 units. Proton 9,804 -3.9 -31.7 39,193 -19.9 Perodua 12,271 -14.2 -16.4 50,661 -7.8 We expect TIV to contract 15-20% for 2009, as the sector continues Toyota 6,884 -3.4 -30.1 24,220 -28.8 to suffer from an absence of new model launches and a stricter Honda 3,425 -12.3 36.8 14,063 43.7 financing environment. Reject rates for Proton’s applicants remain high Nissan 2,501 2.3 -2.9 9,620 2.1 whilst the 85-100bps hike in Hire Purchase (HP) rates on non-national cars will further dampen sales. Mkt share Apr 09 ppt chg ppt chg YTD % chg (%) MoM YoY (unit) YoY A good NAP is needed to wake the sector up. The National Automotive Policy (NAP), which will be revealed by 3Q09, needs to Passenger 90.6 0.1 10.7 90.6 10.3 boldly address among others: (i) consolidation of national marques and Commercial 9.4 -0.1 -10.7 9.4 -10.3 vendors, and (ii) issues on Approved Permits (APs). A pro-active guideline will help shape the sluggish sector. Until then, we maintain National 53.7 -1.7 -4.1 56.2 -1.1 our Underweight call, with Sell calls on Proton and Tan Chong. Non-national 46.3 1.7 4.1 43.8 1.1 Marque Proton 23.8 0.8 -4.7 24.5 -1.7 Perodua 29.8 -2.5 0.6 31.7 1.4 Toyota 16.7 0.6 -2.9 15.2 -3.6 Honda 8.3 -0.5 3.3 8.8 3.4 Nissan 6.1 0.5 1.0 6.0 0.8 Source: MAA Auto sector: Comparative valuations Company Rec Price TP EPS (sen) PER (x) Div Yield (%) P/NTA (x) (RM) (RM) 09F 10F 09F 10F 09F 10F MBM Hold 2.14 2.40 31.9 48.1 6.7 4.4 6.1 6.5 0.5 Tan Chong Sell 1.60 1.05 17.8 17.9 9.0 8.9 3.1 3.1 0.7 UMW Hold 5.60 5.70 34.2 42.2 16.4 13.3 4.2 5.3 1.5 Proton* Sell 2.86 2.50 9.8 6.2 29.3 46.3 3.5 3.5 0.3 Source: Maybank-IB, * calendarised & includes R&D grants of RM120m (FY09) and RM100m (FY10)
  • 2. Auto Total Industry Volume 60,000  Passenger Cars Commercial Vehicles 50,000  40,000  30,000  20,000  Apr‐07 Aug‐07 Dec‐07 Apr‐08 Aug‐08 Dec‐08 Apr‐09 Source: MAA, Maybank-IB USD-RM Movement 3.80 3.72 3.70 3.60 3.53 3.50 3.46 3.45 3.44 3.45 3.41 3.40 3.31 3.30 3.27 3.20 3.20 3.10 3.00 19-May 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 Source: MAA, Maybank-IB 1Q09 JPY-RM Movement 4.00 3.83 3.80 3.70 3.66 3.60 3.40 3.27 3.21 3.20 3.10 2.93 2.95 2.95 3.00 2.80 2.80 2.60 19-May 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 Source: MAA, Maybank-IB 20 May 2009 Page 2 of 4
  • 3. Auto Auto Sector Summary (Quarterly) Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 PROFIT AND LOSS BALANCE SHEET Revenue (RM’m) Gross Cash (RM’m) - MBM Resources 271.9 267.8 307.1 314.9 260.9 - MBM Resources 110.8 119.9 147.6 140.7 124.9 - Tan Chong Motors 441.8 759.6 783.8 1002.5 650.0 - Tan Chong Motors 81.9 115.8 100.1 115.9 76.2 - UMW Holdings 2689.8 2985.1 3568.2 3326.2 2918.4 - UMW Holdings 1553.4 1347.2 1648.9 1573.4 1499.7 - Proton 1454.9 1724.6 1708.8 1838.5 1537.3 - Proton 985.0 1226.0 1386.4 1434.6 1172.8 EBIT (RM’m) Gross Debt (RM’m) - MBM Resources 15.9 21.6 19.1 23.0 10.1 - MBM Resources 45.0 37.4 35.7 32.0 36.9 - Tan Chong Motors 37.1 70.1 86.3 117.7 43.02 - Tan Chong Motors 454.1 431.3 387.0 361.6 569.4 - UMW Holdings 268.2 237.8 306.8 295.4 224.7 - UMW Holdings 295.2 341.3 432.4 467.4 571.0 - Proton 9.0 189.2 57.6 52.7 -58.7 - Proton 485.9 244.5 242.0 255.6 295.5 Pretax profit (RM’m) Net Cash (RM’m) - MBM Resources 30.1 51.5 36.7 42.6 19.5 - MBM Resources 65.8 82.5 111.9 108.7 88.0 - Tan Chong Motors 34.0 67.1 84.0 115.7 40.4 - Tan Chong Motors -372.2 -315.5 -287.0 -245.6 -493.2 - UMW Holdings 315.6 292.9 355.0 353.8 269.9 - UMW Holdings 1258.2 1005.9 1216.5 1105.9 928.7 - Proton 11.0 193.1 58.7 56.6 -60.9 - Proton 499.1 981.6 1144.4 1179.0 877.2 Net profit (RM’m) Shareholders fund (RM’m) - MBM Resources 22.6 42.8 25.7 32.2 16.7 - MBM Resources 759.8 798.1 825.8 834.6 851.3 - Tan Chong Motors 31.9 54.1 68.1 95.4 28.2 - Tan Chong Motors 1232.6 1286.8 1330.1 1399.7 1421.5 - UMW Holdings 143.0 141.8 151.7 152.7 116.1 - UMW Holdings 3130.1 3279.7 3339.4 3410.2 3522.9 - Proton 10.3 236.4 52.0 43.8 -74.7 - Proton 5198.6 5443.0 5480.8 5520.2 5387.9 PROFIT RATIO EBIT margins (%) NTA / Share (RM) - MBM Resources 5.8 8.1 6.2 7.3 3.9 - MBM Resources 3.05 3.20 3.31 3.34 3.41 - Tan Chong Motors 8.4 9.2 11.0 11.7 6.6 - Tan Chong Motors 1.85 1.93 1.99 2.10 2.15 - UMW Holdings 10.0 8.0 8.6 8.9 7.7 - UMW Holdings 5.83 2.94 3.00 3.01 3.07 - Proton 0.6 11.0 3.4 2.9 -3.8 - Proton 9.01 9.36 9.36 9.39 9.10 Pretax margins (%) Inventories - MBM Resources 11.1 19.2 12.0 13.5 7.5 - MBM Resources 101.2 117.2 108.8 98.8 146.8 - Tan Chong Motors 7.7 8.8 10.7 11.5 6.2 - Tan Chong Motors 583.3 579.2 603.1 627.4 854.4 - UMW Holdings 11.7 9.8 9.9 10.6 9.2 - UMW Holdings 1048.9 1317.6 1385.0 1358.0 1464.0 - Proton 0.8 11.2 3.4 3.1 -4.0 - Proton 1282.1 1090.3 1162.6 1215.5 1391.3 Net profit margins (%) Trade Receivables - MBM Resources 8.3 16.0 8.4 10.2 6.4 - MBM Resources 114.1 104.3 104.5 98.9 91.2 - Tan Chong Motors 7.2 7.1 8.7 9.5 4.3 - Tan Chong Motors 307.7 310.9 310.4 111.2 280.2 - UMW Holdings 5.3 4.7 4.3 4.6 4.0 - UMW Holdings 657.8 782.7 734.1 753.0 802.7 - Proton 0.7 13.7 3.0 2.4 -4.9 - Proton 884.6 1022.2 835.4 739.1 776.2 CASH FLOW CASH FLOW Operating (RM’m) Financing (RM’m) - MBM Resources 4.2 3.4 18.5 29.7 -21.2 - MBM Resources -24.9 -15.3 -5.1 -28.4 -0.9 - Tan Chong Motors -33.0 89.1 65.5 67.6 -180.9 - Tan Chong Motors 64.5 -22.9 -68.9 -50.5 200.7 - UMW Holdings 264.0 -77.6 292.4 275.8 56.8 - UMW Holdings -146.1 -57.4 190.7 -71.9 10.2 - Proton 267.9 1028.8 -769.7 164.6 -158.4 - Proton 112.9 101.0 -97.1 48.6 72.4 Investing (RM’m) - MBM Resources -0.8 23.9 17.3 -9.6 4.3 - Tan Chong Motors -65.4 -20.4 -12.3 -0.6 -60.3 - UMW Holdings -24.3 -84.8 -192.8 -268.5 -174.9 - Proton -131.0 -427.2 325.7 -124.0 -160.9 Source: Companies, Maybank-IB 20 May 2009 Page 3 of 4
  • 4. Auto Definition of Ratings Maybank Investment Bank Research uses the following rating system: BUY Total return is expected to be above 10% in the next 12 months HOLD Total return is expected to be between -5% to 10% in the next 12 months SELL Total return is expected to be below -5% in the next 12 months Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Some common terms abbreviated in this report (where they appear): Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax Disclaimer This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Bhd and consequently no representation is made as to the accuracy or completeness of this report by Maybank Investment Bank Bhd and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Maybank Investment Bank Bhd, its affiliates and related companies and their officers, directors, associates, connected parties and/or employees may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward- looking statements. Maybank Investment Bank Bhd expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. This report is prepared for the use of Maybank Investment Bank Bhd's clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of Maybank Investment Bank Bhd and Maybank Investment Bank Bhd accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Published / Printed by Maybank Investment Bank Berhad (15938-H) (Formerly known as Aseambankers Malaysia Berhad) (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194 Stockbroking Business: Level 8, MaybanLife Tower, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888; Fax: (603) 2282 5136 http://www.maybank-ib.com 20 May 2009 Page 4 of 4