We welcome the new measures proposed in the NAP, announced yesterday, to transform the local automotive industry into a regional hub over the longer term with giveaways such as corporate tax holidays and tax exemption on exported goods to lure the global OEMs. While the incentives will benefit the industry overall, we see Proton (BUY, TP: RM5.10) as the clear winner, with the tier-1 autoparts suppliers as the immediate beneficiaries. With the positive measures in creating a viable platform for the industry, we continue to retain our OVERWEIGHT recommendation on the sector.
Maintain OVERWEIGHT on AUTO. We are optimistic on the long-term prospects of the Malaysian automotive industry going forward given the accommodative policy announced yesterday, which reinforces our OVERWEIGHT stance on the sector. As we have yet to access the immediate impact on companies under coverage pending further corporate developments (namely from Proton), our earnings estimates remain unchanged at this juncture. Likewise, our TIV growth assumptions, for which we are projecting only a 3.7% growth for 2010 (of 518,360 units from 500,000 projected in 2009) is also maintained for now pending the overall response from industry players with respect to the new policy. We wish to highlight that the key risks remain over the lack of key new models to boost overall TIV numbers, coupled by the higher financing cost
from a potential OPR hike in 2010. We reiterate our BUY calls on Proton (TP: RM5.10), Tan Chong (TP: RM2.35), New Hoong Fatt (TP: RM2.22) and MBM (TP: RM2.87) while UMW (TP: RM5.27) is retained at a SELL due to its stretched valuations. We have raised our valuation for EPMB to 12x PE given the positive NAP announcement, which bumps up our fair value from RM0.32 to RM0.46, but nonetheless we still retain our SELL recommendation.
Maintain OVERWEIGHT on AUTO. We are optimistic on the long-term prospects of the Malaysian automotive industry going forward given the accommodative policy announced yesterday, which reinforces our OVERWEIGHT stance on the sector. As we have yet to access the immediate impact on companies under coverage pending further corporate developments (namely from Proton), our earnings estimates remain unchanged at this juncture. Likewise, our TIV growth assumptions, for which we are projecting only a 3.7% growth for 2010 (of 518,360 units from 500,000 projected in 2009) is also maintained for now pending the overall response from industry players with respect to the new policy. We wish to highlight that the key risks remain over the lack of key new models to boost overall TIV numbers, coupled by the higher financing cost
from a potential OPR hike in 2010. We reiterate our BUY calls on Proton (TP: RM5.10), Tan Chong (TP: RM2.35), New Hoong Fatt (TP: RM2.22) and MBM (TP: RM2.87) while UMW (TP: RM5.27) is retained at a SELL due to its stretched valuations. We have raised our valuation for EPMB to 12x PE given the positive NAP announcement, which bumps up our fair value from RM0.32 to RM0.46, but nonetheless we still retain our SELL recommendation.