Auto stocks made slight gains yesterday after the Malaysian Automotive Association (MAA) released a bullish forecast on auto sales, which it expects to hit an all-time high of 570,000 units this year.
Tan Chong Motors Bhd gained 10 sen to RM4.50 at the close. Ingress Corporation Bhd, which has a BMW dealership, hit a high of 84 sen in intra-day trading. The counter closed up 5.5 sen or 7.4% at 79.5 sen.
The Edge Financial Daily reported yesterday that the company expected better days ahead, with its first-quarter 2010 earnings almost equivalent to the full year’s for 2009.
Meanwhile, national carmaker Proton Holdings Bhd closed unchanged at RM4.45 after reaching an intra-day high of RM4.47. MBM Resources Bhd, which has Perodua, Daihatsu, Federal Auto and Hino in its stable, closed at RM2.99, down one sen, after touching RM3.03 in intra-day trading.
In a report yesterday, HwangDBS Vickers Research said MAA’s forecast of total industry vehicle (TIV) sales for the year at 570,000 units was in line with its own revision of 578,000 units for 2010.
“Separately, we agree with MAA that there is no need for the auto industry to consolidate because many manufacturers are operating at above capacity,” it said.
On Tuesday, MAA said based on manufacturers working one shift daily, UMW Toyota was operating at 215% capacity, Honda at 202%, Tan Chong Motor at 143% and Perodua at 164% while Proton’s Shah Alam and Tanjong Malim plants were at 54% and 42% capacity, respectively. HwangDBS retained its buy call on Proton and MBM Resources with target prices of RM4.85 and RM4.05, respectively.
Meanwhile, Kenanga Research said the current state of the auto industry was one of optimism that had not been seen since 2005. Although it anticipated TIV for 2H10 to normalise as the second half was seasonally slow, it nonetheless revised its forecast of 546,000 units to 580,000 units.
“The increase in interest rates and fuel subsidy cuts are unlikely to have a significant impact on auto sales. The petrol price hike is beneficial for the national segments and manufacturers that produce smaller capacity vehicles, and will create a market for more fuel-efficient vehicles.
“As markets are what manufacturers respond to, we expect kilometre per litre will eventually become an important feature. Thus demand for vehicles such as Toyota Vios (UMW), Honda City and Nissan Latio (Tan Chong) will grow,” said Kenanga, adding that auto companies should report commendable earnings in 2Q10 given the sustained strong sales momentum.
Kenanga recommendd a buy on Tan Chong and MBM Resources, a trading buy on Proton and a hold on UMW.
This article appeared in The Edge Financial Daily, July 22, 2010.
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