Friday 29 Mar 2024
By
main news image

KUALA LUMPUR (June 9): UMW Holdings Bhd and Bermaz Auto Bhd (BAuto) led the climb among auto stocks as sentiment was boosted by the government’s tax holiday for completely knocked-down (CKD) or locally assembled vehicles.

However, investment analysts, who track the auto industry, opined that though the tax waiver will help to spur sales, sales volume will not soar as much as it did in the three-month goods and services tax (GST)-free period in 2018 due mainly to the current harsh economic conditions.

UMW gained 7.3% or 21 sen to RM3.10 today, reaching a three-month high, valuing it at some RM3.62 billion. But the stock was still down by 30.5% year to date (YTD).

UWM has Toyota vehicles under its belt. It also holds an equity stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua) with MBM Resources Bhd and Daihatsu.

BAuto finished 6.75% or 10 sen higher at RM1.58, valuing it at RM1.84 billion. The Mazda manufacturer and distributor also ended the day at a three-month high, and had fallen by 27.52% YTD.

In the local marque space, DRB-Hicom Bhd, which has a 50.1% stake in Proton Holdings Bhd, went up 3.26% or six sen higher at RM1.90, also constituting a three-month high for the diversified conglomerate. YTD, DRB-Hicom was down by 18.1%.

MBM was up by 2.33% or eight sen at RM3.51, constituting a three-month high. YTD, it was down by 9.07%.

Cycle & Carriage Bintang Bhd (CCB), which has Mercedes-Benz dealerships, finished 5.52% or eight sen higher at RM1.53, reaching a three-month high and valuing it at some RM154.14 million.

Other notable mentions include Tan Chong Motor Holdings Bhd, which finished 1.72% or two sen higher at RM1.18, and Sime Darby Bhd, which closed 0.91% or two sen higher at RM2.21.

Notably, Hap Seng Consolidated Bhd, which also has Mercedes-Benz dealerships in its portfolio, finished 3.19% or 29 sen lower at RM8.81, valuing it at some RM21.93 billion.

The consensus among analysts was that the government’s move to completely suspend sales tax on CKD vehicles and slash sales tax on completely built-up (CBU) or imported vehicles is positive for boosting demand. However, they believed that the economic downturn will result in unemployment and lower discretionary spending, not auguring well for car sales.

Affin Hwang Capital Research’s Brian Yeoh viewed that Malaysians are likely to defer purchases of big-ticket items like cars.

“Furthermore, we sense that many Malaysians are adapting to the work-from-home setting, hence cars may not be perceived as a necessity in the coming months," said Yeoh, who upgraded the auto and auto parts sector to "neutral" from "underweight" previously.

AllianceDBS Research’s Abdul Azim Muhthar noted that as a result of cautious consumer spending, he only raised his 2020 total industry volume (TIV) assumption by 5% to 420,000 units, still 30% lower year-on-year (y-o-y).

“We expect sales to gradually pick up, especially towards December, as customers might prefer to wait for the Covid-19 situation to ease and capitalise on the tax incentives together with year-end campaigns," he wrote in a note.

CGS-CIMB Research’s Mohd Shanaz Noor Azam pointed out that stricter lending requirements and the fact that Malaysia already had one of the highest motorisation rates regionally will likely not lead to a surge in demand as seen in 2018.

MIDF Research’s Hafriz Hezry raised his 2020 TIV forecast to 554,433 units from 504,580 units previously. He expected TIV to contract by 8.3% y-o-y, versus his forecast of a 16.5% y-o-y drop previously.

"The much longer 6.5-month implementation should give the sector sufficient support to ride through a weak second half of 2020 (2H20) before an expected underlying macro improvement sets in towards end-4Q20 (fourth quarter of 2020) or early 2021," Hafriz wrote in a note.

During the three-month GST-free period in 2018, TIV surged by 32% y-o-y or, in absolute terms, about 21,000 units a month against the pre-tax-holiday monthly TIV.

      Print
      Text Size
      Share