Kenanga, RHB maintain "neutral" on auto sector

by **Cals** Fri 19 Apr 2013, 16:46

Kenanga, RHB maintain "neutral" on auto sector
Business & Markets 2013
Written by Bernama
Friday, 19 April 2013 16:19

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KUALA LUMPUR, (April 19) : Kenanga Research has maintained its 'neutral' stance on the automotive sector and retained its 2013 total industry volume (TIV) forecast of 641,560 units.

Kenanga said March’s TIV improved eight per cent year-on-year (y-o-y) to 57,622 units, backed by a longer working month, strong consumer sentiment and the launch of new models.

"Year-to-date, for the first three month this year TIV increased 14 per cent y-o-y to 157,664 units, accounting for 25 per cent of both our and the Malaysian Automotive Association's (MAA) 2013 forecast of 641,560 and 640,000 units respectively," it said in a note today.

However, it said, according to MAA’s press release, the sales volume for April is expected to be lower month-on-month due to the uncertainty of the upcoming general election and as consumers adopt a wait-and-see approach as they anticipate a revised policy on car prices.

Kenanga said its top pick for the sector is Tan Chong with a target price of RM5.60 as it has been a laggard to its peers and could play catch-up as the company is stepping up its growth plans.

"Although there has been a run-up in the share prices of most of our auto stocks, we are maintaining our calls and target prices pending the release of their quarterly results in May and the outcome of the general election," it added.

In another note, RHB Investment Bank also maintained a 'neutral' recommendation on this sector.

With MAA's expectation of lower sales in April, it said regulatory issues and the possibility of consumers deferring their purchase decision are the main risk to the sector.

However, Hong Leong Investment Bank put a 'heavyweight' rating on the auto sector due to possibility of making Malaysia a hub for the regional market,implementation of the Energy Efficient Policy and the appreciation on the Ringgit.

"We maintain our growth expectation of 3.5 per cent year-on-year for this year, despite year-to-date growth of 13.8 per cent year-on-year, due to the higher base in the second half of last year," it said.