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2009-08-09

Malaysia Auto Industrial Faster DemandRecovery

Malaysia Auto Industrial faster demand recover
  • Stronger than expected 1H09 total industry vehicles (TIV) sales led us to raise forecast to 497k units in 2009 vs. 410k previously
  • Raised FY09F NI by 5%-14% for APM, MBM and UMW. Cut FY3/10F loss of Proton by 50%
  • Upgrade APM to BUY, but kept FULLY VALUED for MBM and UMW. Retain HOLD on Proton
























Below is the report summery by Hwang DBS:-

Strong 1H09 TIV sales of 249k (-8% y-o-y). On an annualized basis this is stronger than our earlier expectation of 20% decline for 2009 made back in 1Q09, when the outlook for the economy and the auto sector was rather gloomy. We are now convinced that 2H09 sales would be healthy. In Jun09, Proton sold more vehicles than Perodua – the first time in 3 years. This was helped by Proton’s maiden MPV, the Exora.

Raise 2009 TIV to 497k
After raising forecast sales for Proton and Perodua to 128k (1H09: 65.8k) and 157k (1H09: 77.0k) units respectively. We also factored in higher FY09F sales for Toyota to 81k units. While UMW is expected to launch the Toyota hybrid Prius today (vs. Honda Civic’s in Mar09), Perodua would be launching its MPV in Nov 09 (vs. Proton’s Exora in Apr09). An improving economic outlook coupled with stable interest rates will help to encourage consumption.

Lift forecast earnings.
Consequent to the higher sales assumptions, we raise FY09F net earnings for APM and MBM Resources by 10% and 7% respectively. As such, we raise price targets for APM to RM2.20 (based on 7x FY10F PE) and for MBM Resources to RM2.00 (based on 6x FY10F PE), respectively. Hence, APM is upgraded to BUY but we retain our FULLY VALUED call for MBM Resources. We like APM for its 15% NI growth, 6% net dividend yield, RM1.12 net cash/share as well as strong management.




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