SUNWAY BHD
aggressive pre-Raya promotion with Nissan registering the highest growth of 7%, with its attractive 60th anniversary deals.
The under-performers in m-o-m sales for passenger vehicles were Toyota and Mazda with sales falling by 12% and 9% respectively.
The research house said the consumers were holding back purchases for the new models, which were expected to be unveiled in the second half of the year.
Kenanga said the sales volume for July 2017 was expected to be maintained at June 2017 level with anticipation of delays in the process of vehicle registrations due to uncertainties arising from the liberalisation of motor insurance from July 2017.
On a year to date basis, TIV came in stronger at 284,461 (up 3%), led by Perodua and Honda with market share of 35% and 18%, respectively.
The research house attributed the stronger growth to the aggressive discounts and promotion for the purpose of inventory clearing of older models before the roll-out of the newer models anticipated in the second half of the year.
In addition, Kenanga said the stronger numbers were also contributed by the wide variety of new model launches.
The research house added that the first six months of 2017 sales comprised 48% of its 590,000 TIV forecast for 2017, which was within expectation.
As such, Kenanga has maintained its yearend forecast target of 590,000 TIV on the back of robust sales with the forthcoming model launches such as the new Perodua Myvi, face-lifted Perodua Bezza, Honda City Hybrid, Honda Jazz Hybrid, Honda CR-V, the new Toyota CH-R, Toyota Hilux 2.4G, Toyota Vios 2017, face-lifted Toyota Camry, Mazda CX-5 2017 and Mazda CX-9.
The research house said its view on the sector remained conservative as consumer purchases of automobiles have been clamped by stringent lending guidelines as well as consumer sentiment lingering at a level below the optimistic threshold on higher living expenses.
Additionally, the recent strengthening of the ringgit against the US dollar and yen is still insufficient to cushion the negative effects on the automakers.
Kenanga said Bermaz Auto Bhd was its preferred pick for the sector as the company’s targeted customer base in the middle-income to high-income bracket was less sensitive to the rising cost of living.
It added that there was high potential value to be unlocked with the proposed listing of Bermaz’s Philippines subsidiary where robust growth in its automotive market was anticipated, potential dividend pay-out of about 90%, which translated into fair dividend yield of about 7.5%, and higher locally-assembled (CKD) model of Mazda CX-5 slated for September 2017. Target Price: RM5.04
SUNWAY has obtained the necessary approvals from Bursa Malaysia with regards to its earlier proposals – listing of up to 2,804,471,128 bonus issue of shares, admission to the Official List, a listing and quotation of the proposed up to 631,006,003 bonus issue of warrants and a listing of up to 631,006,003 new Sunway shares to be issued pursuant to the exercise of the warrants.
The approvals came in ahead of HLIB Research’s expectations, especially involving the first-of-its-kind step-down mechanism on warrant exercise price.
For context, Sunway proposed to issue four bonus issue of shares for every three existing shares and three free warrants for every 10 existing shares on June 14.
As a result of the approvals, HLIB Research predicted Sunway holding an extraordinary general meeting (EGM) in August to secure shareholders’ approval before finalising the ex-dates and exercise price of the free warrants.
Judging from the fast turnaround, HLIB Research expected the exercises to be completed before end of September.
HLIB Research recommended Sunway trades closer to its peers such as IJM and Gamuda, especially given its diversified income stream and declassification from property sector.
HLIB Research reckoned the price to earnings ratio (PE) of 13.6 times relative to peers represented a deep value stock with potential assets unlocking and growing healthcare business which are under-ap-