PP 7767/09/2011(028730)

20 October
RHB 2010
Research
Corporate Highlights

Malaysia
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

S e cto r Upd at e
20 October 2010

MARKET DATELINE
Recom : Overweight
Motor (Maintained)

Lower TIV On Shorter Working Month

Table 1: Motor Sector Valuations

Fair EPS growth PER P/NTA P/CF ROE GDY
Price
FYE Value (%) (x) (x) (x) (%) (%) Rec
(RM/s) (RM/s) FY11 FY12 FY11 FY12 FY11 FY12 FY11 FY11 FY11
Proton^ Mar 4.83 5.50 11.6 6.8 6.4 6.0 0.5 0.4 -180.6 7.0 0.0 OP
MBM Dec 3.15 5.30 5.3 5.0 6.5 6.2 0.7 0.7 14.7 11.5 3.8 OP
APM Dec 4.80 5.53 7.0 13.8 9.6 8.4 1.2 1.1 5.1 0.0 2.7 OP
UMW Dec 6.75 7.27 7.2 11.9 11.4 10.2 1.7 1.5 7.9 15.6 3.6 MP
Tan Chong Dec 5.53 6.16 16.2 48.6 12.2 8.2 2.0 1.6 10.5 17.3 2.2 MP
Sector Avg 10.2 17.2 9.8 8.3
Sector Avg(ex-Proton) 9.69 20.8 10.92 9.0

^ FY11-12valuations refer to those of FY12-FY13

Chart 1. TIV Growth

♦ Yoy TIV down 5.8%, mom TIV down 21.3%. September TIV of
43,443 was marginally down (vs. 46.1k units in Sept-09), but still 600,000 100.0

80.0

reflective of the strong TIV numbers recorded since the beginning of the 500,000
60.0

year. The mom fall in TIV for September was unsurprising, as it was a
400,000 40.0

20.0
300,000

shorter working month and August TIV was a high base as consumers 0.0

200,000 -20.0

rushed to purchase cars before the Hari Raya festivities. 100,000

-40.0

-60.0

♦
0 -80.0

YTD TIV still strong. YTD TIV of 453,249 achieved 77% of our full-

2009F

2010F
1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008
year forecasts of 587,698 and 80% of MAA’s forecast of 570,000. YTD TIV (LHS) Growth yoy % (RHS)

yoy growth was 13.9% (vs. 398k units for YTD FY09), reflective of the
Chart 2. Market Share
general improvement in the local motor sector.

♦
60.0

Perodua and Proton undoubted market leaders, while Toyota 50.0

leads the non-national segment. There were no changes to the 40.0

ranking of the marques despite there being a general mom decrease in 30.0
%

the industry. Proton and Perodua maintained their grip on around 50% 20.0

of the domestic market with 26.8% and 28.7% respectively, while 10.0

Toyota continued with 15.5% of market share. 0.0

2009F

2010F
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008
♦ 2010-12 TIV projections maintained. No changes are made to our
Proton Perodua Toyota Nissan Honda

2010-2012 TIV numbers even though annualised TIV numbers stand at Source: MAA, RHBRI
604,332. This is as we expect the moderation in TIV for 2HFY10 to
continue going into the final quarter of the year. Our expected TIV
growth for FY11-12 is 4.0% and 3.2% respectively.

♦ Risks. The key risks to our projections would be: 1) Inflationary

pressure amid economic recovery; and 2) Weakening of RM against
US$ and Yen.

♦ Maintain Overweight stance on the sector. No changes are made to

our Overweight view on the sector, and the valuations of the stocks Loong Kok Wen, CFA
under our coverage. We expect the strong TIV numbers to be sustained (603) 9280 2239
going into 2011 driven by: 1) strengthened RM against US$ and Yen loong.kok.wen@rhb.com.my
that would help to reduce costs of imported materials; and 2) positive
consumer sentiment with the greater stability of the economy.

Please read important disclosures at the end of this report.

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 20 October 2010
September TIV Down 5.8% YoY, And 21.3% MoM

♦ Yoy TIV down 5.8%. September TIV of 43,443 was marginally down (vs. 46.1k units in Sept-09), but still
reflective of the strong TIV numbers recorded since the beginning of the year. Passenger TIV was the main
reason behind the marginal drop, slipping 7.9% (vs. 42k units in Sept-09); while commercial TIV actually
rose by 16.1% (vs. 4k units TIV in Sept-09).

♦ Mom TIV down 21.3%. The fall in TIV for September was unsurprising, as it was a shorter working
month and August’s TIV was a high base as consumers rushed to purchase cars before the Hari Raya
festivities. Passenger TIV fell 21.9% (vs. 49.6k units in Aug-10) while commercial TIV fell 15.9% (vs. 5.6k
units in Aug-10). Improved sequential TIV numbers are expected for October as business is back-to-usual.

♦ YTD TIV still strong. YTD TIV of 453,249 achieved 77% of our full-year forecasts of 587,698 and 80% of
MAA’s forecast of 570,000. YTD yoy growth was 13.9% (vs. 398k units for YTD FY09), reflective of the
general improvement in the local motor sector.

Chart 3: TIV And Yoy Growth

Source: MAA, RHBRI

Chart 4: TIV Mom & Yoy (units) Chart 5: TIV Mom & Yoy Growth

Source: MAA, RHBRI Source: MAA, RHBRI

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 20 October 2010

Chart 6: TIV & MoM Growth

Source: MAA, RHBRI

Chart 7: TIV YTD 09 vs YTD 10 Chart 8: TIV YTD 10 Yoy Growth

Source: MAA, RHBRI Source: MAA, RHBRI

Table 2: Qoq and Yoy Motor Sales Comparison

Sep-09 Aug-10 Sep-10 Mom Chg Yoy Chg YTD 09 YTD 10 Yoy chg
(Nos.) (Nos.) (Nos.) (%) (%) (Nos.) (Nos.) (%)

Proton 13,541 14,527 11,646 (19.8) (14.0) 110,501 120,331 8.9

Perodua 14,388 17,176 12,459 (27.5) (13.4) 122,859 141,111 14.9
Toyota 7,061 7,999 6,726 (15.9) (4.7) 59,387 66,837 12.5
Nissan 2,828 3,174 2,885 (9.1) 2.0 23,700 26,495 11.8
Honda 2,469 4,572 2,800 (38.8) 13.4 29,575 34,104 15.3
TIV 46,104 55,208 43,443 (21.3) (5.8) 397,950 453,249 13.9
Passenger 42,073 49,642 38,761 (21.9) (7.9) 361,793 408,383 12.9
Commercial 4,031 5,566 4,682 (15.9) 16.1 36,157 44,799 23.9

Source: MAA

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 20 October 2010

♦ Perodua and Proton undoubted market leaders. There were no changes to the ranking of the marques
despite there being a general mom and yoy decrease in the industry. Proton and Perodua maintained their
grip on around 50% of the domestic market with 26.8% and 28.7% respectively. This is expected to continue
given both marques popularity in the <RM50k passenger vehicle segment.

♦ Toyota leads non-national segment. Toyota continued to top in the non-national segment with 15.5% of
market share; however Honda has lost its second place position to Nissan in September. Nissan increased its
market share to 6.6% (vs 5.7% in Aug 2010) while Honda’s market share slipped to 6.4% (vs 8.3% in Aug
2010). On YTD yoy basis, there were no major changes among the three non-national marques.

Chart 9: Market Share Mom & Yoy Chart 10: Market Share YTD 09 vs. YTD 10

Source: MAA, RHBRI Source: MAA, RHBRI

Forecasts and Assumptions

♦ 2010-12 TIV projections maintained. No changes are made to our 2010-2012 TIV numbers even though
annualised TIV numbers stand at 604,332. This is as we expect a moderation in TIV for 2HFY10 to continue
going into the final quarter of the year. Our expected TIV growth for FY11-12 is 4.0% and 3.2% respectively.
Note that our forward growth assumptions are above the projected growth of 2% p.a. by MAA.

Table 3:Motor Sales Forecast By Key Marques

2009a 2010 2011 2012 2010 2011 2012
(Nos.) (Nos.) (Nos.) (Nos.) (% yoy) (% yoy) (% yoy)
Proton 148,031 162,114 174,837 182,346 9.5 7.8 4.3
Perodua 166,736 195,090 196,803 202,252 17.0 0.9 2.8
Toyota 81,785 89,692 91,286 97,290 9.7 1.8 6.6
Nissan 31,493 41,410 43,599 57,813 31.5 5.3 32.6
Honda 38,783 40,000 44,000 48,517 3.1 10.0 10.3
TIV 536,905 587,698 611,265 630,953 9.5 4.0 3.2
Passenger 486,342 536,392 558,417 584,398 10.3 4.1 4.7
Commercial 50,563 51,306 52,848 46,555 1.5 3.0 -11.9
Source: RHBRI

Table 4: MAA's Forecasts for 2010-14

2010 2011 2012 2013 2014

Passenger 516,500 526,400 536,400 547,400 560,000

Commercial 53,500 54,600 56,600 56,600 58,000

TIV 570,000 581,000 592,000 604,000 618,000

Growth (%) 6.1 2.0 2.0 2.0 2.3

Source: MAA

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 20 October 2010
Risk

♦ Risks. The key risks to our projection would be: 1) Inflationary pressure amid economic recovery; and 2)
Weakening of RM against US$ and Yen.

Valuations and Recommendation

♦ Maintain Overweight stance on the sector. No changes are made to our Overweight view on the sector,
and the valuations of the stocks under our coverage. We expect the strong TIV numbers to be sustained
going into 2011 driven by: 1) strengthened RM against US$ and Yen that would help to reduce costs of
imported materials; and 2) positive consumer sentiment with the greater stability of the economy.

Chart 11: TIV vs. YoY Growth

700000 25.0

600000 20.0

15.0
500000
10.0
400000
5.0
300000
0.0
200000
-5.0

100000 -10.0

0 -15.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010f 2011f

TIV growth yoy %

Source: MAA, RHBRI

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
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The recommendation framework for stocks and sectors are as follows : -

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 20 October 2010
Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or
more over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to
take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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securities, subject to the duties of confidentiality, will be made available upon request.

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