Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD
Research House: MAYBANK
Automotive sector
Maintain neutral: We expect 2011 total industry volume (TIV) growth to slow to 2% to 3% as domestic demand drives towards saturation. Corporate earnings growth remains challenging. Margins will come under pressure on rising advertising and promotions (A&P) expenses.
The currency impact which aided last year's earnings is unlikely to be repeated. We are 'neutral' on the sector with 'buys' on Proton and MBM on undemanding valuations. We upgrade Tan Chong to 'hold' following a 15% correction in the share price since our 'sell' call on Sept 23, 2010. UMW remains a 'hold'.
TIV reached 605,156 units last year (+12.7% year-on-year), surpassing our estimates of 580,000 units, driven by stronger-than-expected December sales, which has seasonally been a slower month. New registration hit 54,765 units in December (+22.1% month-on-month). Both national and non-national vehicles reported impressive monthly growth, up 28.8% and 14.4% respectively to 31,000 and 23,765 units.
Perodua was the top performer in December. It reported a remarkable 6% m-o-m growth, which elevated its market share to 35.5% (+8.7 percentage points m-o-m). Perodua sold 19,444 units, underpinned by its flagship models: MyVi (+58%; 8,289 units), ViVa (+61%; 7,022 units) and Alza (+72%; 4,133 units). Toyota and Honda also reported growth, up 32% and 19% m-o-m respectively, while Nissan and Proton were the major losers in December, with contracting monthly sales of 14% and 4% respectively.
TIV growth is projected to slow to 2% to 3% y-o-y this year (or 617,000 to 623,000 unit sales) as domestic demand drives towards saturation. Also, higher interest rates in 2HFY11 (we expect a 50 basis points rise in the OPR in 2HFY11) will affect demand. We expect Perodua to retain its position as the best-selling marque as buyers continue to favour small vehicles, amid a rising petrol-price environment. We also see growing interests in hybrid cars (a small segment for now). The recent tax cuts and 'green theme' drive make them more affordable and appealing.
'Neutral' on autos; growth catalyst remains subdued. Interest for European (VW, Renault) and South Korean (Hyundai, Kia) marques are picking up, which could take away some of the local (Proton) and Japanese (Toyota, Honda, Nissan) marques' market shares. Margins will also come under pressure as A&P expenses rise to capture sales. The stronger ringgit (+10.5% against the US dollar in 2010), which benefited the majority of automakers' earnings last year is unlikely to so. We expect the ringgit to close at 3 to 3.05 (+1.0% y-o-y) for 2011. ' Maybank Investment Bank Bhd Research, Jan 24
This article appeared in The Edge Financial Daily, January 25, 2011.
Company Name: TAN CHONG MOTOR HOLDINGS BHD
Research House: MAYBANK
Automotive sector
Maintain neutral: We expect 2011 total industry volume (TIV) growth to slow to 2% to 3% as domestic demand drives towards saturation. Corporate earnings growth remains challenging. Margins will come under pressure on rising advertising and promotions (A&P) expenses.
The currency impact which aided last year's earnings is unlikely to be repeated. We are 'neutral' on the sector with 'buys' on Proton and MBM on undemanding valuations. We upgrade Tan Chong to 'hold' following a 15% correction in the share price since our 'sell' call on Sept 23, 2010. UMW remains a 'hold'.
TIV reached 605,156 units last year (+12.7% year-on-year), surpassing our estimates of 580,000 units, driven by stronger-than-expected December sales, which has seasonally been a slower month. New registration hit 54,765 units in December (+22.1% month-on-month). Both national and non-national vehicles reported impressive monthly growth, up 28.8% and 14.4% respectively to 31,000 and 23,765 units.
Perodua was the top performer in December. It reported a remarkable 6% m-o-m growth, which elevated its market share to 35.5% (+8.7 percentage points m-o-m). Perodua sold 19,444 units, underpinned by its flagship models: MyVi (+58%; 8,289 units), ViVa (+61%; 7,022 units) and Alza (+72%; 4,133 units). Toyota and Honda also reported growth, up 32% and 19% m-o-m respectively, while Nissan and Proton were the major losers in December, with contracting monthly sales of 14% and 4% respectively.
TIV growth is projected to slow to 2% to 3% y-o-y this year (or 617,000 to 623,000 unit sales) as domestic demand drives towards saturation. Also, higher interest rates in 2HFY11 (we expect a 50 basis points rise in the OPR in 2HFY11) will affect demand. We expect Perodua to retain its position as the best-selling marque as buyers continue to favour small vehicles, amid a rising petrol-price environment. We also see growing interests in hybrid cars (a small segment for now). The recent tax cuts and 'green theme' drive make them more affordable and appealing.
'Neutral' on autos; growth catalyst remains subdued. Interest for European (VW, Renault) and South Korean (Hyundai, Kia) marques are picking up, which could take away some of the local (Proton) and Japanese (Toyota, Honda, Nissan) marques' market shares. Margins will also come under pressure as A&P expenses rise to capture sales. The stronger ringgit (+10.5% against the US dollar in 2010), which benefited the majority of automakers' earnings last year is unlikely to so. We expect the ringgit to close at 3 to 3.05 (+1.0% y-o-y) for 2011. ' Maybank Investment Bank Bhd Research, Jan 24
This article appeared in The Edge Financial Daily, January 25, 2011.
No comments:
Post a Comment