Berjaya Auto rises 2.9% or 10 sen; CIMB's top pick for auto sector.

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KUALA LUMPUR (Feb 23): Berjaya Auto Bhd shares rose 2.9% or 10 sen to RM3.50 after CIMB Investment Bank Bhd tagged the stock as its top pick for the automotive sector.

As at 10.13am, a total of 273,100 shares had changed hands.

In a note today, CIMB Investment Bank Bhd analyst Azman Hussin said Berjaya Auto (fundamental: 2.35; valuation: 0.9) had the best growth trajectory among the automotive stocks in what was expected to be a challenging year for the sector.

Azman expects Berjaya Auto to continue outperforming 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.

He notes that weak consumer sentiment and uncertainties surrounding the introduction of Goods and Services Tax (GST) are the main hurdles to the sector’s sales growth this year.

“While 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,” said Azman.

He said last year saw total industry volume (TIV) growing 1.6% year-on-year (y-o-y) to 666,465 units, above CIMB Investment Bank’s initial forecast of 655,000 units, but was largely in line with its revised forecast of 670,000 units.

On share price movements, he said Berjaya Auto was the best performing stock, with its share price surging 100%, while Tan Chong Motor Holdings Bhd was the worst, tumbling 47% in 2014.

Azman said last year saw foreign brands overtaking national brands in overall market share, carving out a 53.3% share of the market due to the good performance of the two biggest foreign brands, Toyota and Honda.

“We believe it was the first time this has ever happened since the introduction of Proton in 1985,” he added.

CIMB Investment Bank expects a flat TIV growth this year, with the foreign brands continuing to hold the lead and maintaining their market share.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)