Autos Malaysia

June 26, 2012
AUTOS
More vrooom to grow
IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
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AUTOS
June 26, 2012
TABLE OF CONTENTS
1. 2. 3. 4. 5. 6. BACKGROUND .................................................................................................................................. 6 OVERVIEW OF MALAYSIAN AUTOS ............................................................................................... 6 MALAYSIAS AUTO SECTOR VIS--VIS THAILAND AND INDONESIA ....................................... 9 OPPORTUNITIES FOR THE MALAYSIAN AUTO PLAYERS ......................................................... 17 CHALLENGES AHEAD FOR THE MALAYSIAN AUTO PLAYERS ................................................ 23 VALUATION AND RECOMMENDATION ...................................................................................... 30
June 26, 2012
REGIONAL
MALAYSIA SINGAPORE INDONESIA THAILAND PHILIPPINES CHINA, HONG KONG
AUTOS
SHORT TERM (3 MTH)
LONG TERM
Conviction
Notes from the Field
More vrooom to grow

Despite Malaysias high vehicle penetration relative to Indonesia and Thailand, vehicle demand should continue to see support from the countrys favourable demographics, rising disposable incomes, new model launches and pent-up demand this year, among others.
Loke Wei Wern

T (60) 3 20849946 E weiwern.loke@cimb.com
Figure 1: Malaysias vehicle sales

units 700000 600000 500000 400000
When the market opens, there will definitely be more players that want to come in. One of the positive things about our country is the disposable income, especially with the middle class, compared with neighbouring countries.
Datuk Aminar Rashid Salleh, Managing Director of Perodua
300000 200000 100000 0 2012F 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
SOURCES: CIMB, MAA
Further out, there are pockets of export opportunities under AFTA and the upcoming ASEAN Economic Community (AEC) 2015, which local auto players can capitalise on. We maintain our Overweight call on the sector with DRB-HICOM as our preferred pick.
One of the lowest cost of vehicle ownership

Interestingly, while Malaysias car prices are among the top three highest in the region, the cost of vehicle ownership is relatively low, largely due to the countrys subsidised fuel. As long as affordability levels stay low, we believe that domestic demand for cars should remain firm.
Demand fundamentals are intact

Highlighted Companies DRB-HICOM
With the recent acquisition of Proton, DRBs brands now straddle the premium and mid-market segments. As Volkswagen AGs (VW) local partner, DRB will play an integral part in VWs expansion plans in the ASEAN region.
UMW Holdings
UMW controls close to 50% of Malaysias total vehicle sales via Toyota and Perodua, both of which are market leaders in the non-national and national segments, respectively. UMW boasts the highest dividend yield in the sector.
Tan Chong Motor

Tan Chongs strategic expansion of its product mix is intact. By year-end, it will have a presence in the B-segment through Nissan Almera. Its presence in the small but growing Indochina market will provide additional growth opportunities.
Malaysia has a sizeable car-buying population that presents huge opportunities. An estimated 46% of the population fall into the 20-49 age bracket. This age bracket tends to be the key driver of vehicle demand. Also, the government is seeking to transform the country into a high-income nation by 2020, which would require the annual income to rise to the equivalent of US$15,000 p.a. from US$9,700 currently. As income levels rise, so will the propensity to spend on big-ticket items like cars.
Pockets of export opportunities are present

Although Malaysia lags behind Thailand and Indonesia in terms of total vehicle exports, there are pockets of export opportunities which auto players can capitalise on. We like auto players such as DRB-HICOM, which is well-poised to ride Volkswagen AGs pursuit of the ASEAN auto market. Tan Chong also has a foothold in the Indochina auto market.
AUTOS
June 26, 2012
KEY CHARTS Malaysias position in ASEAN

Malaysia ranks third in terms of total vehicle sales in the region after Indonesia and Thailand. It is the second-largest passenger car market in ASEAN and the fourth-largest in terms of commercial vehicles.
1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Indonesia Malaysia Philippine Thailand Brunei Singapore Vietnam
45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 16% 46% 37% 90 100 16% 46% 37%
High vehicle penetration rate

The vehicle penetration rate for Malaysia, as measured by the number of vehicles owned per capita, is relatively high. The vehicle penetration rate is estimated to be around 40%, i.e. 4 out of 10 Malaysians own some form of vehicle.
700,000 600,000 500,000 400,000 300,000 200,000 100,000 -
Annual domestic vehicle sales (LHS)
Motorcar/capita (RHS)
Sizeable car-buying population

Malaysia has a sizeable car-buying population that auto players can tap. An estimated 46% of the current population falls into the 20-49 age bracket. This age bracket tends to be the key driver of vehicle demand.
120% 100% 80% 60% 40% 20% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F 0 to 19 years ('m) 20 to 49 years ('m) 50 and above ('m) 43% 43% 43% 42% 42% 42% 41% 37% 37% 43% 43% 43% 43% 43% 43% 43% 46% 46%
13%
14%
14%
14%
15%
15%
15%
16%
16%
Private vehicles will stay as the dominant choice of transport, for now
The utilisation of public transport (measured as a percentage of journeys during peak periods) in Malaysia is relatively low. As such, we applaud the governments efforts to improve the countrys public transportation network in order to increase usage. But we note that these efforts will take time to bear fruit. Also, much of the improvements in the public transport network are focused on the Greater KL/Klang Valley area, which means that other populous states, like Johor and Perak, still offer good potential for auto players.
Toronto London Hong Kong Singapore Johor Bahru Penang Klang Valley 10 20 30 40 50 60 70 80
SOURCE: CIMB, 10MP, PRESS REPORT
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June 26, 2012
Figure 2: Sector Comparisons

Company Brilliance China Automotive Dongfeng Motor Group Guangzhou Auto - H Geely Automobile Holdings Great Wall Motor Minth Group Qingling Motors Company-H Weichai Power Co Ltd-H China/Hong Kong average Astra International Indomobil Sukses Int'l Indonesia average Tan Chong Motor Holdings UMW Holdings DRB-Hicom Malaysia average Average (all) Bloomberg Ticker 1114 HK 489 HK 2238 HK 175 HK 2333 HK 425 HK 1122 HK 2338 HK ASII IJ IMAS IJ TCM MK UMWH MK DRB MK Recom. Outperform Neutral Trading Buy Neutral Outperform Neutral Outperform Neutral Outperform Outperform Underperform Outperform Outperform Price (local curr) 7.07 12.26 6.53 2.70 15.00 8.50 1.81 31.55 6,700 6,850 4.50 9.02 2.55 Target Price (local curr) 11.70 15.80 7.50 3.30 19.30 7.70 3.50 34.40 7,700 9,200 4.20 9.55 4.10 Market Cap (US$ m) 4,579 13,612 6,883 2,601 7,170 1,180 579 7,609 28,525 1,992 946 3,298 1,543 Core P/E (x) CY2012 CY2013 9.7 7.0 8.3 7.6 7.8 6.7 8.9 7.0 8.6 7.4 8.9 7.9 9.1 7.8 9.2 8.9 8.6 7.5 14.8 12.0 15.2 10.6 14.9 11.9 14.6 9.4 12.5 11.9 8.5 6.1 14.6 9.4 10.6 9.0 3-year EPS CAGR (%) 38.2% 6.4% 9.4% 19.2% 18.0% 10.9% 16.7% -2.6% 10.4% 12.8% 35.2% 14.0% 15.4% 11.0% 37.8% 15.4% 11.6% P/BV (x) CY2012 CY2013 2.90 2.05 1.61 1.36 1.02 0.92 1.49 1.25 1.85 1.56 1.15 1.04 0.51 0.50 1.57 1.34 1.52 1.30 3.83 3.18 3.27 2.56 3.79 3.13 1.53 1.35 2.26 2.10 0.49 0.44 1.53 1.35 2.07 1.76 Recurring ROE (%) CY2012 CY2013 CY2014 35.3% 34.3% 28.6% 21.3% 19.4% 17.6% 13.7% 14.5% 14.6% 18.2% 19.5% 17.8% 23.6% 22.7% 21.0% 13.5% 13.9% 13.9% 5.6% 6.4% 7.4% 18.6% 16.3% 14.6% 19.1% 18.7% 17.4% 27.9% 29.1% 27.3% 23.7% 27.1% 24.5% 27.6% 28.9% 27.1% 11.0% 15.3% 15.4% 18.8% 18.3% 18.1% 6.4% 7.5% 7.9% 11.0% 15.3% 15.4% 21.2% 21.2% 19.8% EV/EBITDA (x) Dividend Yield (%) CY2012 CY2013 CY2012 CY2013 70.0 54.9 0.0% 0.0% 3.2 2.3 1.8% 1.9% 10.2 7.6 3.8% 4.5% 6.6 5.0 1.3% 1.7% 4.3 3.6 3.1% 3.6% 3.9 3.1 3.9% 4.4% -3.6 -3.5 9.0% 10.5% 3.8 3.5 0.3% 0.3% 4.5 3.5 1.9% 2.2% 11.0 8.6 2.5% 2.6% 20.3 15.1 0.6% 1.0% 11.4 8.9 2.4% 2.5% 9.0 6.9 2.2% 2.3% 6.6 6.3 4.8% 5.0% -5.3 -4.5 1.9% 2.2% 9.0 6.9 2.2% 2.3% 6.9 5.6 2.1% 2.3%
SOURCES: CIMB, COMPANY REPORTS
Calculations are performed using EFA Monthly Interpolated Annualisation and Aggregation algorithms to December year ends
AUTOS
June 26, 2012
Malaysian autos
Table of Contents
1. BACKGROUND 2. OVERVIEW OF MALAYSIAN AUTOS 3. MSIA VIS--VIS THAILAND AND INDO 4. OPPORTUNITIES 5. THREATS 5. VALUATION AND RECOMMENDATION p.4 p.4 p.7 p.15 p.21 p.28
1. BACKGROUND 1.1 Where does Malaysia stand?

Among the ten member nations of ASEAN (Malaysia, Thailand, Indonesia, the Philippines, Brunei, Singapore, Vietnam, Cambodia, Myanmar and Laos), only three countries, namely Thailand, Indonesia and Malaysia, are major demand centres for motorcars (excluding motorcycles and scooters). Accommodative government policies, an expanding middle-income group and rising disposable income are among the common factors helping to propel their auto industries forward. While all three countries have gained significant mileage in the auto sector and lead the other seven member nations, by perhaps leaps and bounds, in terms of annual vehicle sales and the development of the local automotive industry, future growth prospects among the three member nations differ. In this report, we will 1) provide a brief overview of Malaysias auto industry, 2) study Malaysias auto sector vis--vis the other two major demand centres, i.e. Indonesia and Thailand, and 3) examine the opportunities and threats facing auto assemblers in the country.
Notes from the Field
There are about one billion people living in this region (Asia, outside China), so the potential to grow the business is huge
Jean Yves Dossal, sales director of PSA Peugeot Citroen Asian operations
2. OVERVIEW OF MALAYSIAN AUTOS 2.1 Brief background on Malaysias auto sector

Malaysias automobile industry dates back to the 1960s when the government developed a policy to promote an integrated automotive industry to strengthen its industrial base and reduce its dependency on the agricultural sector. The countrys automobile industry comprises the following parties: 1) national car manufacturers, 2) local assemblers of foreign brands, and 3) parallel importers. Further down the supply chain are the used car dealers, whose role is to provide an avenue for vehicles to be resold, and the automotive components/parts manufacturers, who supply car parts to vehicle manufacturers and assemblers. In total, there are four vehicle manufacturers and 10 vehicle assemblers with over 15 manufacturing and assembly plants in Malaysia. There are numerous auto components and parts players.
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Figure 3: Manufacturing and assembly plants in Malaysia

Assembly and manufacturing plants Hicom Automotive Manufacturers (Malaysia) Sdn Bhd (Plant I) Hicom Automotive Manufacturers (Malaysia) Sdn Bhd (Plant II) Assembly Services Sdn Bhd Honda Malaysia Sdn Bhd Inokom Corporation Sdn Bhd Vehicle make Suzuki (PV) Volkswagen (PV) Mitsubishi Fuso (CV) Mercedes Benz (PV and CV) Toyota (PV and CV) Hino (CV) Honda (PV) BMW (PV) HD5000 (CV) Hyundai-Inokom (PV and CV) Landrover (CV) Mazda (PV) Isuzu (CV) Isuzu D'Max (CV) Hicom Perkasa (CV) Chery (PV) Changan (PV) Dong Feng (CV) Hyundai (PV) Joy Long (PV) Tuah (CV) ZX Auto (CV) Volvo (PV and CV) Kinglong (CV) Renault (CV) Nissan (PV and CV) Renault (CV) Foton (CV) Nissan (PV) Perodua (PV) Proton (PV and CV) Proton (PV) Kia (PV) Naza (PV) Peugeot (PV) Scania (CV)
Isuzu-Hicom Malaysia
Oriental Assemblers Sdn Bhd
Swedish Motor Assemblies Sdn Bhd
Tan Chong Motor Assemblies (Plant I)
Tan Chong Motor Assemblies (Plant II) Perodua Manufacturing Sdn Bhd Perusahaan Otomobil Nasional Bhd (Proton) Proton Tanjung Malim Sdn Bhd
Naza Automotive Manufacturing Sdn Bhd Scania (Malaysia) Sdn Bhd
SOURCES: CIMB, MAA
The four national car manufacturers in the country are Proton, Perodua, Inokom Corporation and Malaysian Truck & Bus. Proton and Perodua are the biggest players in the domestic market as both players control close to 56% market share combined in terms of total vehicle sales. The other 10 car assemblers assemble non-national brands. Non-national vehicle sales in Malaysia are skewed towards the Japanese brands although their market positions have been somewhat weakened by last years back-to-back natural disasters in Japan and Thailand and the gradual rise of the Korean brands. Assembly Services (Toyota), Tan Chong Motor (Nissan) and Honda Malaysia (Honda) are the three biggest assemblers after Proton and Perodua. They collectively control 25% of the total vehicle market. The European brands presence in Malaysia is still somewhat restricted to the luxury and premium segments. The punitive tax structure on non-ASEAN imports has inflated European car prices, making their cars generally uncompetitive from a pricing point of view compared to the national car brands and other locally-assembled Japanese brands. But this is gradually changing as European car companies, such as Mercedes Benz, Volvo, Peugeot and Volkswagen AG (VW), have set up CKD operations in the country. The European brands in Malaysia control only c.6% of the countrys total vehicle sales.
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June 26, 2012
Figure 4: Auto players in Malaysia

National players Perusahaan Otomobil Nasional Sdn Bhd Perodua Manufacturing Sdn Bhd Inokom Corporation Malaysian Truck & Bus Sdn Bhd Other car assemblers HICOM Automotive Manufacturers Malaysia Assembly Services Sdn Bhd Honda Malaysia Sdn Bhd Kinabalu Motor Assembly Sdn Bhd Naza Automotive Manufacturing Sdn Bhd Oriental Assemblers Sdn Bhd Swedish Motor Assemblers Sdn Bhd Tan Chong Motor Assemblers Sdn Bhd Asia Automobile Industries Sdn Bhd Scania (Malaysia) Sdn Bhd Brands assembled Proton Perodua Inokom HICOM and Isuzu commercial trucks Shareholders Daihatsu & Mitsui (51%), Perodua Sdn Bhd (49%) 53%-owned by Sime Darby DRB, Isuzu Motor, Itochu Corp, Hicom Holdings
Mercedes, Suzuki, Isuzu, Mitsubishi Fuso, Daewoo, Iveco, LDV, VW Toyota Honda Isuzu Peugeot, Kia, Naza Hyundai, Chery, Joy Long, LMG Ford, Mazda, Volvo Nissan, UD Sinotruk Scania
DRB-Hicom (93%) UMW (51%), Toyota Motor (49%) DRB (34%), Oriental Holdings (15%), Honda (51%) MBM Resources (70%) Naza Group Oriental Holdings (97%) Volvo Car Corporation (100%) Tan Chong Motor (70%) Mikani Holdings Scania CV AB (100%)
SOURCES: CIMB, MAA
Figure 5: Total vehicles sales in Malaysia in 2011 (passenger and commercial)

Makes Perodua Proton Toyota Honda Nissan Mitsubishi Naza Isuzu Volkswagen Suzuki Others (30 players) Total Passenger 179,989 158,601 63,493 32,480 25,504 3,754 9,347 7,350 7,308 47286 535,112 Commercial 56 23,458 6,772 8,299 9,299 16881 64,765 Total 179,989 158,657 86,951 32,480 32,276 12,053 9,347 9,299 7,350 7,308 64167 599,877 Market share 30.0% 26.4% 14.5% 5.4% 5.4% 2.0% 1.6% 1.6% 1.2% 1.2% 10.7% 100.0%
SOURCES: CIMB, MAA
2.2 Second-largest passenger car market in ASEAN

Malaysia ranks third (600,123 units in 2011) in terms of total vehicle sales in the region after Indonesia (894,164) and Thailand (794,081). It is the second-largest passenger car market in ASEAN (sold 535,113 units in 2011), having lost the coveted first place to Indonesia (601,945) in 2010. It ranks fourth in terms of commercial vehicle sales (sold 65,010 units in 2011), after Thailand (433,640), Indonesia (292,219) and the Philippines (96,754).
Figure 6: Motor vehicle sales in ASEAN in 2011

Country Brunei Indonesia Malaysia Philippine Singapore Thailand Vietnam Passenger vehicles Commercial vehicles 13,472 1,083 601,945 292,219 535,113 65,010 44,862 96,754 33,493 6,077 360,441 433,640 64,505 45,155 2011 14,555 894,164 600,123 141,616 39,570 794,081 109,660 2010 13,589 764,710 605,156 168,490 51,891 800,357 111,737
SOURCES: CIMB, ASEAN AUTOMOTIVE FEDERATION
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June 26, 2012
Figure 7: Passenger vehicle sales in 2011

700,000 600,000 500,000 400,000 300,000 200,000 100,000 Malaysia Thailand Indonesia Philippine Brunei Vietnam Singapore
Figure 8: Commercial vehicle sales in 2011

350,000 300,000 250,000 200,000 150,000 100,000 50,000 Malaysia Indonesia Philippine Thailand Brunei Singapore Vietnam
2009 2010 2011
3. MALAYSIAS AUTO SECTOR VIS--VIS THAILAND AND INDONESIA 3.1 Vehicle penetration rate is often used as a yardstick for growth
Barring years where sales were affected by the unexpected financial crises, supply shocks from natural disasters and uncertainties surrounding the National Automotive Policy (NAP), Malaysias vehicle sales have consistently trended up. The countrys population has achieved a CAGR of 2% over the past ten years while vehicle sales (excluding motorcycles) have outpaced it with a CAGR of 4%. From 97,262 in 1980, total vehicle sales have risen to 599,877 units in 2011. Malaysias solid economic growth and high GDP per capita relative to the other member ASEAN nations (except Brunei and Singapore) were among the key factors underpinning this sales uptrend over the past three decades.
Figure 9: GDP per capita, current prices

US$ 10,000 8,000 6,000 4,000 2,000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Cambodia Malaysia Thailand
Indonesia Myanmar Vietnam
Lao People's Democratic Republic Philippines
SOURCES: CIMB, IMG
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June 26, 2012
As a result, the vehicle penetration rate, measured by the number of vehicles owned per capita, is relatively high in Malaysia. It is estimated that a total of 21.4m motor vehicles run on our roads today, out of which 11.4m or 53% are motorcars. This translates into an estimated vehicle penetration rate of 40% (i.e. 4 out of 10 Malaysians own some form of vehicle), considerably higher than Indonesia (7%) and Thailand (21%). Since the vehicle penetration rate is often used as a yardstick for vehicle sales growth, low levels in Indonesia and Thailand suggest that there is a lot of potential for expansion in the two countries auto industries.
Figure 10: Estimated vehicle penetration among ASEANs major vehicle demand centres
Malaysia Indonesia Thailand Philippines 2010 38.7% 6.3% 19.7% 3.5% 2011 39.7% 6.6% 20.8% 3.6%
SOURCES: CIMB
Figure 11: Malaysia - motorisation rate

700,000 600,000 500,000 400,000 300,000 200,000 100,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
Figure 12: Thailand - motorisation rate

900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
4% 4% 3% 3% 2% 2% 1% 1% 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
25%
20%
15%
10%
5%
0%
SOURCES: CIMB, IMF, MAA
SOURCES: CIMB, IMF, AAF, JAMA
Figure 13: Indonesia - motorisation rate

1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1% 0% 3% 2% 5% 4% 7% 6%
Figure 14: Philippines - motorisation rate

180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 -
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3.2 Debunking the expensive car myth

The tax structure for Malaysias auto sector is designed to encourage the development of the local automotive sector. There are three different types of levies on vehicles: 1) import duties, 2) excise duties, and 3) sales tax. Prior to the ASEAN Free Trade Agreement (AFTA), Malaysias duty structure was punitive to protect the interests of the two national auto players. While the Malaysian government has gradually relaxed its protective grip on the sector, the duty structure still favours the national brands.
Figure 15: Types of taxes on motor vehicles

Apart from the normal corporation tax, the government levies three other types of taxes on motor vehicles sold in Malaysia. These three types of taxes can be summarised as follows: 1) Import duties - Levied on the CIF (carriage, insurance and freight) price of the vehicle. The rate depends on: a) type of vehicle b) CBU or CKD c) engine size 2) Excise duties - Levied on the CIF price + local parts + local assembly costs 3) Sales tax - 10% of the OMV plus excise duties and import duties
SOURCES: CIMB
Import duties of vehicles from within ASEAN have been gradually reduced to o% over the years. But vehicles in the country are still relatively more expensive compared to its peers in the region. The key culprit is the exorbitant excise duties, which the government imposed to make up for the revenue lost from the scrapping of import duties under AFTA in 2004. These excise duties range from 60% to 105%, depending on engine capacity and vehicle type. On top of this, all vehicles are slapped with a 10% sales tax. To put things into perspective, Indonesia imposes luxury tax of 0-75% on its vehicles, along with a 10% VAT, while Thailand imposes excise duties of 3-35%, in addition to a 7% VAT.
Figure 16: ASEAN car duty structure (as at Jan 10)

Tax description Import duty Excise/special consumption/luxury sales tax VAT/sales tax Interior tax MFN rate CEPT rate Vietnam Malaysia Thailand Indonesia Philippines CKD CBU CKD CBU CKD CBU CKD CBU CKD CBU 5%-45% 83% 10% 30% 0%-30% 80% 10% 40% 10% 30% 5% 83% 0% 0% 0% 0% 0% 0% 0% 0% 45%-60% 45%-60% 60%-105% 60%-105% 17%-40% 17%-40% 30%-75% 30%-75% 2%-60% 2%-60% 10% 10% 10% 10% 7% 7% 10% 10% 12% 12% 10% 10% -
SOURCES: CIMB, COMPANY
A comparison of the absolute prices of Honda Accord and Toyota Vios sold in selected countries in this region revealed that car prices in Singapore and Vietnam are among the highest. On fears that uncontrolled growth in the number of vehicles running on the road will cause massive traffic jams on the small island, the Singapore government has taken several measures to manage car ownership. These measures include the hefty ad valorem tax, registration fee, certificate of entitlement (COE), vehicle quota systems (VQS), road taxes and electronic road pricing (ERP), among others. Vietnam is second due to its punitive tax structure. Unlike the ASEAN-6 countries, import duties for vehicles in Vietnam have yet to be fully removed. Malaysia ranks third.
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Figure 17: Price comparison of similar models in ASEAN

Honda Accord Singapore Vietnam Malaysia Indonesia Thailand Philippines Toyota Vios Singapore Vietnam Malaysia Indonesia Thailand Philippines Local currency 179,900 1,435,000,000 168,144 483,500,000 1,547,000 1,700,000 Local currency 114,188 602,000,000 87,952 241,850,000 690,000 820,000 US$ 142,332 68,858 54,565 51,944 49,377 36,263 US$ 90,343 28,914 28,335 26,063 21,936 19,126 Variant 2.4 (new facelift) 2.4 2.4 Vti-L 2.4 Vti-L 2.4 EL 2.4 S Variant 1.5G (with non-guaranteed COE) 1.5G 1.5G 1.5G 1.5G 1.5G
SOURCES: CIMB
Interestingly, while Malaysias car prices are among the top three highest in the region, the cost of vehicle ownership (CVO) is said to be one of the lowest. The CVO is based on the purchase price of the car and its running costs, including fuel prices, road tax, insurance premium and vehicle registration fees. Critical to Malaysias low CVO is the subsidised fuel, which is the lowest compared to Thailand, Singapore, Indonesia, Vietnam and the Philippines. As such, while Malaysias absolute car prices are inflated by the excise duties, low running costs help to bring down the overall cost of owning a vehicle in the country. As long as affordability levels stay low, domestic demand for cars should remain intact, in our opinion.
3.3 Passenger car segment is Malaysias mainstay; Thailand and Indonesia focus on trucks and MPV
Due to the establishment of the national car programme, Malaysias auto sector is largely geared towards the production of passenger vehicles. The segment accounted for 80-90% of total vehicle sales in the country over the last 10 years. Specifically within the passenger vehicle segment in Malaysia, Perodua and Proton are the strongest players with 34% and 30% market share, respectively, followed by the three Japanese players Toyota (12%), Honda (6%) and Nissan (5%).
Figure 18: Malaysia's vehicle sales by type (passenger vs. commercial)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 19% 20% 9% 9% 9% 10% 11% 81% 80% 91% 91% 91% 90% 89%
Passenger cars
Commercial cars
SOURCES: CIMB, MAA
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Figure 19: Total passenger vehicle sales in 2011

Makes Perodua Proton Toyota Honda Nissan Naza Volkswagen Suzuki Hyundai Mazda Mercedes Benz Peugeot Others (17 players) Total Total PV 179,989 158,601 63,493 32,480 25,504 9,347 7,350 7,308 6,469 5,716 5,439 5,345 28,071 535,112 Market share 33.6% 29.6% 11.9% 6.1% 4.8% 1.7% 1.4% 1.4% 1.2% 1.1% 1.0% 1.0% 5.2% 100%
SOURCES: CIMB, MAA
In the commercial vehicle segment, which the national auto players are absent in, Toyota is by far the strongest player with a 36% market share. Isuzu plays second fiddle with a 14% market share, followed closely by Mitsubishi with a 13% market share.
Figure 20: Total commercial vehicle sales in 2011

Makes Toyota Isuzu Mitsubishi Nissan Hino Ford Daihatsu Mitsubishi Fuso Hyundai-Inokom Hicom Perkasa Others (13 players) Total Total 23,458 9,299 8,299 6,772 5,584 2,349 2,118 1,756 1,519 1,518 2,093 64,765 Market share 36.2% 14.4% 12.8% 10.5% 8.6% 3.6% 3.3% 2.7% 2.3% 2.3% 3.2% 100.0%
SOURCES: CIMB, MAA
Within the passenger vehicle segment, there are four sub-categories, namely, 1) passenger cars (sedans, hatchbacks), the largest sub-category in terms of vehicle sales, 2) multi-purpose vehicles (MPV), 3) four-wheel drives/sports utility vehicles (4WD/SUV), and 4) window vans. The passenger cars sub-category, which is traditionally the national auto players stronghold, has always dominated the passenger vehicle segment. But the market share of passenger cars has been on a downtrend over the years as more affordable people-movers muscle their way up. Two notable launches that turned the tide were Proton Exora (launched in Apr 09) and Perodua Alza (launched in Nov 09). These two were Protons and Peroduas maiden MPV models and have proven to be the bullets which helped the carmakers conquer the two top spots within the MPV segment with a combined market share of 62% in 2011. In 2010, the year which captured the first full-year contribution of both the Exora and Alza, sales of the MPV segment jumped 70% yoy. In the non-national segment, Toyota and Nissan are by far the largest players in the segment with a collective market share of 29%.
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Figure 21: Malaysia's passenger vehicle sales by sub-category

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% 18% 9% 3% 1% 2007 10% 2% 1% 2008 12% 2% 1% 2009 3% 1% 2010 16% 3% 1% 2011 78% 78% 76% 69% 70%
Passenger cars
4WD/SUV
Window Van
MPV
SOURCES: CIMB, MAA
Figure 22: PV: Passenger car sub-category

Makes Perodua Proton Toyota Honda Nissan Suzuki Naza Volkswagen Mercedes Benz Mazda Ford BMW Peugeot Hyundai Hyundai/Inokom Lexus Chevrolet Mitsubishi Audi Volvo Mini Porsche Renault Chery Kia Subaru Land Rover Mahindra Ssangyong Total Passenger cars 142,587 137,535 45,470 27,203 10,006 6,940 6,933 6,815 5,377 4,623 4,548 4,315 4,089 3,489 2,866 1,711 871 787 582 475 301 136 71 61 26 8 417,825 Market share 34.1% 32.9% 10.9% 6.5% 2.4% 1.7% 1.7% 1.6% 1.3% 1.1% 1.1% 1.0% 1.0% 0.8% 0.7% 0.4% 0.2% 0.2% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
SOURCES: CIMB, MAA
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Figure 23: PV: MPV sub-category

Makes Perodua Proton Toyota Nissan Chery Naza Honda Mazda Peugeot Mitsubishi Volkswagen Ssangyong Ford Renault Total MPV 37,402 21,064 14,229 12,557 2,662 2,324 1,170 788 477 456 205 186 58 10 93,588 Market share 40% 23% 15% 13% 3% 2% 1% 1% 1% 0% 0% 0% 0% 0% 100%
SOURCES: CIMB, MAA
The 4WD/SUV sub-category is entirely dominated by non-national brands. Honda is the biggest contender in this category with a market share of 22%, followed by Mitsubishi (14%) and Hyundai (11%). Market share for this sub-category has been inching up over the past five years, in line with the general trend in emerging markets.
Figure 24: PV: 4WD/SUV sub-category

Makes Honda Mitsubishi Hyundai Toyota Kia Nissan Hyundai/Inokom Peugeot BMW Chevrolet Suzuki Audi Volkswagen Volvo Mazda Porsche Ford Chery Land Rover Naza Ssangyong Mercedes Benz Mahindra Renault Subaru Lexus Mini Perodua Proton Total 4WD/SUV 4,107 2,511 2,004 1,763 1,384 1,088 952 779 685 401 368 345 330 326 305 279 233 187 133 90 58 53 10 10 9 18,410 Market share 22.3% 13.6% 10.9% 9.6% 7.5% 5.9% 5.2% 4.2% 3.7% 2.2% 2.0% 1.9% 1.8% 1.8% 1.7% 1.5% 1.3% 1.0% 0.7% 0.5% 0.3% 0.3% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
SOURCES: CIMB, MAA
Although the market share of the passenger car sub-category has been floundering over the past three years, a slew of new launches in this segment could tip the scales in its favour this year. The 1% pt increase in market share from 69% in 2010 to 70% in 2011 was partly due to new models, such as the all-new Myvi (launched in Jun 11) and the Proton Saga facelift (launched in Dec 2010). This year, there is a host of major launches in the passenger cars sub-category, such as Proton Preve, Honda City facelift, all-new Toyota Camry,
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all-new Hyundai Elantra, Toyota Prius C and the Toyota Prius facelift. These models could draw interest back to the passenger car sub-category. Both Thailand and Indonesia do not have their own national car programmes. Largely through incentives and low tax rates, Thailand has established itself as a hub for pick-up trucks in the region, where sales are supported by the countrys agricultural activities. Thailand is also the worlds number two market for pick-up trucks after the US. Sales of this segment account for a good 41% of Thailands total vehicle sales. Meanwhile, Indonesia focuses on the MPV segment, where sales account for slightly over 40% of the countrys total vehicle sales.
3.4 Thailand and Indonesia are major production bases; Malaysia is largely domestic-centric
Based on the table below, Thailands vehicle production has historically exceeded its domestic sales. This is because many global auto players have made Thailand their production base for the region. Major auto players, such as Toyota, Nissan, Honda, Isuzu, Suzuki, Mitsubishi, General Motors and Ford, have already set up manufacturing plants in the country. Thailands seamless supply chain is partly the reason behind its success as a production hub for global auto players in this region. According to an industry expert, Thailand has the largest number of Japanese automotive parts suppliers investing in the country, i.e. 500 vs. Indonesias 160. But Indonesia is catching up. For example, Nissan has pledged to further strengthen its presence in Indonesia to support its programme to make the country a production hub for ASEAN. Indonesian Industry Minister MS Hidayat was quoted as saying that the company planned to invest US$400m to expand the production capacity of its existing plant in the country from the current 100,000 units to 250,000 units in 2014. Indonesias demography, i.e. huge population base and expanding middle-income class, is one of the countrys key attractions. That said, the countrys supply chain is not as developed as Thailands while infrastructure such as roads is still inadequate. On the other hand, vehicles produced in Malaysia are largely to feed domestic demand. In the past, protectionist measures prevented global auto players from penetrating the countrys automotive sector. But the landscape is slowly changing. Peugeot and more recently Volkswagen AG (VW) have expressed interest to make Malaysia their production hub for the region. Both Peugeot and VW do not currently have a manufacturing presence in the region.
Figure 25: Vehicle sales vs. vehicle production

Vehicle sales Brunei Indonesia Malaysia Philippines Singapore Thailand Vietnam Vehicle production Brunei Indonesia Malaysia Philippines Singapore Thailand Vietnam 2006 296,008 503,048 1,188,044 35,087 2007 411,638 441,678 1,287,346 75,249 2008 600,844 530,810 63,621 1,394,029 115,038 2009 464,816 489,269 62,523 999,378 107,760 2010 702,508 567,715 80,477 1,645,304 106,166 2011 837,948 533,515 64,906 1,457,795 100,465 2006 12,522 318,904 490,768 99,541 137,564 682,161 40,897 2007 14,220 433,341 487,716 117,903 122,254 631,251 80,392 2008 14,680 603,774 548,115 124,449 110,574 615,270 110,186 2009 12,365 483,550 536,905 132,444 79,503 548,871 119,460 2010 13,589 764,710 605,156 168,490 51,891 800,357 111,737 2011 14,555 894,164 600,123 141,616 39,570 794,081 109,660
SOURCES: CIMB, AAF
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3.5 Exposure to green technology; Thailand is ahead while Indonesia plays catch-up
The global auto market is increasingly gravitating towards green technology with Asia leading in terms of the sales of electric and hybrid vehicles. According to J.D. Power and Associates, Asia controls 56% of the hybrid/electric vehicle market, followed by North America (32%) and Europe (13%). Within Asia, Japan is the biggest market, followed by China. The hybrid/electric vehicle market in ASEAN is relatively small, although this is gradually changing. Thailand is the first ASEAN country to build hybrid vehicles with the Camry hybrid the first model it rolled out. Unfavourable tax structures have previously kept the cars expensive and beyond the reach of the masses. To encourage the development of the green car industry and to reduce the reliance on pick-up trucks, Thailand has introduced the eco-car programme, which provides incentives to auto players that build small and fuel-efficient cars meeting Euro 4 emissions standards and consume less than 5 litres per 100km. Companies investing in the manufacturing of small eco-cars are provided up to eight years of corporate tax breaks and duty-free imports of related machinery and equipment. So far, five auto players, i.e. Nissan, Honda, Suzuki, Mitsubishi and Toyota, have signed on for the eco programme and invested. The total eco-car production capacity of these five companies is 585,000 vehicles per year. Malaysia does not have a comprehensive green vehicle programme like Thailand. But there was no shortage of initiatives and incentives rolled out during the 2009 National Automotive Policy (NAP) and budget to encourage the manufacturing of green vehicles in the country. We also expect eco-friendly measures to feature in the upcoming revised NAP. In Malaysia, Toyota is the first mover in introducing green vehicles with the rollout of Toyota Prius. Although sales of green vehicles were still relatively negligible at less than 5%, acceptance of these vehicles is definitely improving. Indonesia is relatively far behind in terms of green vehicle sales as the government imposes high taxes on imported cars. A 10-75% tax is slapped on vehicles which are deemed as luxury items, a category that the hybrid and electric vehicles fall under. This is on top of the 40% tax imposed on imported vehicles. But this is set to change. Indonesias President Susilo Bambang Yudhoyono has said that the government plans to offer various incentives to auto players to make hybrid cars more affordable, including cancelling luxury sales taxes on these green vehicles in exchange for a lower excise tax. An eco-car project is expected to hit the road this year to propel the country towards becoming a full-scale production base for hybrid vehicles by 2020.
4. OPPORTUNITIES FOR THE MALAYSIAN AUTO PLAYERS

Based on the vehicle penetration rate, which is one of the yardsticks for growth for the auto sector, Malaysias vehicle sales growth potential could be more subdued compared to Indonesia and Thailand. The potential for exports also seem rather limited given that most of the global auto players have made either Thailand or Indonesia their production base. That said, while growth prospects seem relatively less exciting, there are trends and opportunities in Malaysia that the domestic auto players can take advantage of, such as 1) the countrys favourable demographics in the form of a large working population and rising middle-income group, 2) improved export opportunities under AFTA and the ASEAN Economic Community (AEC) in 2015, and 3) a sizeable replacement market.
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4.1 Favourable demographics; large working population and rising middle-income group
Malaysia has a sizeable car-buying population that auto players can tap. Over the past 10 years, Malaysias population has expanded at a steady clip of about 2% p.a. from 23.8m in 2001 to 28.7m in 2011. An estimated 46% (or est. 13.7m) of the current population falls into the 20-49 age bracket. This age bracket tends to be the key driver of vehicle demand as it comprises the young working population through to the more established working adults who are generally more affluent.
Figure 26: Population breakdown by age group

0 to 19 years ('m) 10.6 10.8 10.9 11.1 11.2 11.3 11.5 10.4 10.6 10.7 10.9 20 to 49 years ('m) 10.6 10.9 11.1 11.3 11.5 11.8 12.0 12.9 13.2 13.4 13.7 50 and above ('m) 3.3 3.4 3.6 3.8 3.9 4.1 4.3 4.6 4.7 4.8 4.9
2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F
SOURCES: CIMB, CEIC
Figure 27: Population breakdown by age group (%)

120%
100% 13% 80% 43% 43% 43% 43% 43% 43% 43% 14% 14% 14% 15% 15% 15% 16% 16% 16% 16%
60%
46%
46%
46%
46%
40% 43% 43% 43% 42% 42%
20%
42%
41%
37%
37%
37%
37%
0% 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F
0 to 19 years ('m)
20 to 49 years ('m)
50 and above ('m)
SOURCES: CIMB, CEIC
Out of the 13.7m, 20% (or 2.7m) are aged 20-24 years old. This group of people is generally either approaching the end of their tertiary education or has just joined the workforce. Given the state of Malaysias public transportation system, a car might be deemed essential for travelling to and from work. Therefore, we think this age group should be a good representation of first-time car buyers. Meanwhile, youths aged 15-19 make up an estimated 9% (or est. 2.8m) of the countrys population. Since the legal driving age in Malaysia is 18, this age group represents another potential source of demand for cars. We think these two groups make good target markets for entry-level vehicles. Less than 15% (or 3.4m) of Malaysias population are 55 years old and above. While the older age group, such as retirees, will still buy cars, the loss of earnings could mean more cautious spending, especially on big-ticket items.
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Figure 28: Breakdown of 20-49 age group (%)

120% 100% 80% 60% 40% 19% 20% 21% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F 21% 21% 21% 21% 21% 21% 20% 20% 20% 20% 18% 19% 19% 19% 19% 19% 18% 18% 18% 18%
12% 14% 16% 18%
12% 15% 16% 17%
13% 15% 16% 17%
13% 15% 16% 17%
13% 15% 16% 17%
13% 15% 16% 17%
13% 15% 16% 17%
13% 15% 16% 17%
13% 15% 16% 17%
13% 15% 16% 17%
13% 15% 16% 18%
20 to 24 Years ('m) 40 to 44 Years ('m)
25 to 29 Years ('m) 45 to 49 Years ('m)
30 to 34 Years ('m)
35 to 39 Years ('m)
SOURCES: CIMB, CEIC
Vehicle sales are also, to a large extent, driven by income levels since income determines the purchasing capacity of households and the relative affordability of cars. Apart from Vietnam and Singapore where vehicle sales are affected by sharp changes in excise duties, taxes and COE premiums, vehicle sales in Malaysia, Thailand, Indonesia and the Philippines have largely tracked the GDP per capita. As such, we see it as good news that the government plans to transform the country into a high-income nation by 2020, which would require the annual income to rise to the equivalent of US$15,000 p.a. from US$9,700 currently. As income levels increase, a bigger proportion of the population will be able to afford cars. This presents an opportunity for new players. National car players with entry-level cars, like Proton and Perodua, will be able to take advantage of new car buyers who were previously unable to afford the big-ticket purchase while non-national car players can take advantage of existing car owners who wish to upgrade to non-national cars.
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Figure 29: Malaysia - vehicle sales vs. GDP per capita (US$)
700,000 600,000 500,000 400,000 6,000 300,000 200,000 100,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 4,000 2,000 0 12,000 10,000 8,000
Figure 30: Thailand - vehicle sales vs. GDP per capita (US$)
900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2,500 2,000 1,500 1,000 500 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 6,000 5,000 4,000 3,000 2,000 1,000 0
Annual vehicle sales
Gross domestic product per capita, current prices
SOURCES: CIMB, IMF, AAF, VARIOUS AUTO BODIES
Figure 31: Indonesia - vehicle sales vs. GDP per capita (US$)
1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
Figure 32: Philippines - vehicle sales vs. GDP per capita (US$)
180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 -
Figure 33: Vietnam - vehicle sales vs. GDP per capita (US$)
140,000 120,000 100,000 80,000 60,000 40,000 20,000 2006 2007 2008 2009 2010 2011 1,600 1,400 1,200 1,000 800 600 400 200 0
Figure 34: Singapore - vehicle sales vs. GDP per capita (US$)
140,000 120,000 100,000 80,000 60,000 40,000 20,000 0
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4.2 Opportunities under AFTA and the ASEAN Economic Community (AEC) in 2015
To seek further growth opportunities, auto players are eyeing the overseas markets, especially within the region. The ASEAN Free Trade Agreement (AFTA), where its main objective is to create an integrated market within ASEAN in order to increase the regions competitive edge compared to the rest of the world, has made this possible. AFTAs main mechanism is the Common Effective Preferential Treatment (CEPT). Member countries had decided to reduce tariffs within a period of 15 years beginning 1 Jan 93 where final effective tariffs were agreed to be within the range of 0-5%. Under the CEPT, motor vehicles are eligible for concessional tariffs if it has 40% ASEAN content.
Figure 35: Import and excise duties on CKD motor vehicles for Malaysia (%)
ASEAN (CEPT) Import Duty (ID) Excise duty (ED) 2003 2004 2005 2006 2003 2004 2005 42 42 60 70 80 5 10 20 30 40 40 10 20 30 40 40 25 25 25 25 25 0 10 10 10 10 10 10 10 10 10 10 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 55 55 55 55 55 30 30 30 30 30 30 45 45 45 45 45 60 70 80 90 100 30 30 40 70 80 90 50 60 70 80 90 90 120 150 200 250 40 40 60 120 150 170 60 90 120 150 170 NON-ASEAN (MFN) Import duty Excise duty 2004 2005 2006 2003 2004 2005 35 35 35 35 35 5 20 20 20 20 20 20 20 20 20 20 10 10 10 10 10 5 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 0 10 10 10 10 10 10 10 10 10 10 55 55 55 55 55 30 30 30 30 30 30 45 45 45 45 45 60 70 80 90 100 30 30 40 70 80 90 50 60 70 80 90 90 120 150 200 250 40 40 60 120 150 170 60 90 120 150 170
Type/Engine capacity Passenger cars < 1800 1800 - 1999 2000 - 2499 2500 - 2999 Above 3000 MPV/Van < 1500 1500 - 1799 1799 - 1999 1999 - 2499 2499 - 2999 Above 3000 4WD < 1800 1800 - 1999 2000 - 2499 2500 - 2999 Above 3000
2006 75 80 90 105 125 60 65 75 90 105 125 65 75 90 105 125
2003 42 42 60 70 80 5 10 20 30 40 40 10 20 30 40 40
2006 75 80 90 105 125 60 65 75 90 105 125 65 75 90 105 125
SOURCES: CIMB, VARIOUS
Figure 36: Import and excise duties on CBU motor vehicles for Malaysia (%)
ASEAN (CEPT) Import Duty (ID) 2004 2005 2006 2006 2010 70 90 110 150 190 40 40 50 90 110 120 40 50 80 100 110 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Excise duty (ED) 2003 2004 2005 2006 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 60 70 80 90 100 30 30 40 70 80 90 50 60 70 80 90 90 120 150 200 250 40 40 60 120 150 170 60 90 120 150 170 75 80 90 105 125 60 65 75 90 105 125 65 75 90 105 125 NON-ASEAN (MFN) Import duty Excise duty 2003 2004 2005 2006 2003 2004 2005 140 170 200 250 300 60 60 80 150 180 200 60 80 150 180 200 80 100 120 160 200 60 60 70 100 120 130 60 70 100 120 130 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 60 70 80 90 100 30 30 40 70 80 0 50 60 70 80 90 90 120 150 200 250 40 40 60 120 150 170 60 90 120 150 170
Type/Engine capacity Passenger cars < 1800 1800 - 1999 2000 - 2499 2500 - 2999 Above 3000 MPV/Van < 1500 1500 - 1799 1799 - 1999 1999 - 2499 2499 - 2999 Above 3000 4WD < 1800 1800 - 1999 2000 - 2499 2500 - 2999 Above 3000
2003 140 170 200 250 300 60 60 80 150 180 200 60 80 150 180 200
2006 75 80 90 105 125 60 65 75 90 105 125 65 75 90 105 125
SOURCES: CIMB, VARIOUS
Liberalisation under AFTA-CEPT has opened up opportunities for the Malaysian auto sector. The low duties applied across all ASEAN countries provide auto players a much more sizeable market to tap. Higher production volume leads to economies of scale, which will have positive implications on the
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cost base. Not only that, AFTA has made it possible for foreign players to set up production bases in the region. Malaysia has been chosen as the main production hub for Peugeot right-hand-drive vehicles in ASEAN. The key beneficiary of this is Naza Group, which has been appointed its contract assembler. More recently, DRB-HICOM has been appointed the contract manufacturer for Volkswagen (VW). The VW cars will first be assembled for Malaysia, then ASEAN. But the liberalisation of the sector, as with any other sectors, is not without its challenges. There will be a more level playing field and auto players (whether national or non-national brands) will no longer be able to enjoy favourable treatment at home. Cost structures have to be streamlined. Auto players that are able to gain mileage in export markets and increase production volumes in domestic assembly and manufacturing facilities should generally be able to achieve the economies of scale needed to lower unit production costs. Ultimately, we think auto players with the clout, scale and lower production cost base will be the ones that will be able to withstand the competition under AFTA. Proton and Perodua are already working on growing their export markets. Other beneficiaries of increased economic cooperation under AFTA are DRB-HICOM, UMW and Tan Chong. DRB-HICOM is VWs partner of choice for the latters expansion initiatives in the region. Tan Chong also has plans in place for its expansion in the Indochina region. For UMW, we think that expansion into markets like Thailand and Indonesia will be limited given Toyota Motors direct presence in these countries. But we think UMW will stand to benefit if Malaysia is made the hub for the production of selected models for onward export to other countries in the region. Currently, only the ASEAN-6 (Malaysia, Thailand, Indonesia, the Philippines, Singapore and Brunei) has reduced import duties for vehicles with minimum 40% local content to 0%. The other ASEAN-4 countries (Cambodia, Myanmar, Vietnam and Laos) have not fully complied with the 0-5% duty structure under the AFTA-CEPT. The ASEAN Economic Community is expected to be enforced in 2015 where a single market and production base is to be established by the 10 ASEAN members. By implication, all 10 ASEAN members should, by then, have 0-5% import duties on ASEAN cars. The removal of duties should help facilitate cross-border sales and open up new markets for auto players.
4.3 Sizeable replacement demand

The replacement market in Malaysia is sizeable. Malaysia has the second-largest passenger car market in ASEAN, which provides a good platform for auto players. Given the combination of economic uncertainty and good quality cars, the lifespan of a car before it is replaced could be creeping up. While we are unable to accurately ascertain the average lifespan of a car before it is replaced, if we assume a typical 5-year replacement cycle, an estimated 487,176 vehicles are due for replacement this year. In our analysis, we assume that 20% of owners will replace their vehicles after five years, 30% after six years and 40% after seven years. Based on these assumptions, sales from replacement demand will total about 465,592 units in 2012 alone. On top of that, we estimate that 6% of the 2.7m population within the age group of 20-24 years will purchase vehicles for the first time as this group generally consists of people who are either approaching the tail end of their tertiary education or have just joined the workforce and will need a car to commute to/from work. Based on these factors, the total vehicle sales from replacement and first-time owners will total about 625,639 units, which is marginally below our 2012 sales projection of 628,022. If we extend our analysis to 2017 based on the same assumptions, we arrive at a vehicle sales CAGR of 4%. But again, we think this is a rough estimation of the long-term sustainable growth rate. Year-on-year growth in vehicle sales could vary depending on economic conditions, new model launches, government policies and the like.
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Figure 37: Estimates of sustainable vehicle demand

% of people who replace cars after five (5) years % of people who replace cars after six (6) years % of people who replace cars after seven (7) years Replacement demand Replacement after five years Replacement after six years Replacement after seven years Total replacement demand New vehicle demand % of first time buyers from the age group of 20-24 years (i.e. 2.7m) Implied vehicle demand (units) 2012F 20% 30% 40% 97,435 147,230 220,926 465,592 160,047 6% 625,639 2013F 20% 30% 40% 109,623 146,153 196,307 452,083 186,722 7% 638,805 2014F 20% 30% 40% 107,381 164,435 194,870 466,686 213,397 8% 680,083 2015F 20% 30% 40% 121,031 161,072 219,246 501,349 213,397 8% 714,745 2016F 20% 30% 40% 119,975 181,547 214,762 516,284 213,397 8% 729,681 2017F 20% 30% 40% 125,604 179,963 242,062 547,630 213,397 8% 761,027
SOURCES: CIMB, MAA, CEIC
5. CHALLENGES AHEAD FOR THE MALAYSIAN AUTO PLAYERS 5.1 Current public transport system makes car ownership almost a necessity for some
The countrys inadequate public transportation system has been one of the countrys vehicle demand growth drivers. This is particularly true when compared to more developed countries, like Singapore and Hong Kong. Despite improvements in the public transportation system over the years, this mode of transport has been falling out of favour. The market share of land public transport (LPT) in the morning peak hour has fallen from 34% in the 1980s to 10-12% in 2008. This share is relatively low compared to other international cities, such as Hong Kong (90% of LPT), Singapore (63% of LPT) and London (55% of LPT). While the increase in vehicle penetration rate has resulted in a rise in congestion, door-to-door travel times for private vehicles remain competitive against the use of public transport, according to the Land Public Transport Commission (SPAD). Travel times are typically much higher by public transport. MRT Corp said that the choice of private vehicles over public transport by residents in the Greater KL and Klang Valley area is showing an uptrend. We believe these trends reflect not only the affordability of cars, rising income levels and changes in household characteristics but also the state of the countrys public transport and increase in highway network supply.
Figure 38: Summary of existing issues

Rail passengers key issues Service availability Service capacity Poor integration with bus feeder services Quality of existing track and signaling Ticketing integration Bus passengers key issues Punctuality Waiting and travel time Accessibility Bus condition Interchange Bus driver attitude Information Bus service Taxi passengers key issues Service availability Users safety Drivers attitude Call service Taxi condition Willingness to go to destination Charging according to the meter
SOURCES: CIMB, SPAD
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Figure 39: Population density (persons per sq km)

Toronto
London
Hong Kong
Singapore
Johor Bahru
Penang
Klang Valley 1,000 2,000 3,000 4,000 5,000 6,000 7,000
SOURCES: CIMB, 10MP, PRESS REPORTS
Figure 40: Regional comparison (% of public transport usage)

Bangladesh
Tokyo
Manila
Singapore
Seoul
Kuala Lumpur
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
SOURCES: EDGE WEEKLY
Figure 41: Public transport (% of journeys in peak periods)

Toronto
London
Hong Kong
Singapore
Penang
Klang Valley
10
20
30
40
50
60
70
80
90
100
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Figure 42: Vehicle density (vehicles per km per road)

Toronto
London
Hong Kong
Singapore
Johor Bahru
Penang
Klang Valley 100 200 300 400 500 600 700 800 900 1,000
Unless there is a significant overhaul in the connectivity and efficiency of the public transportation system, we think that private cars will still be the preferred mode of transport. But now that the government is stepping up its initiatives to improve the countrys public transport, what will be the implications on the future demand for cars? Recall that improving urban public transport is one of the six National Key Result Areas (NKRAs). RM2.8bn has been allocated to this NKRA initiative, which is to be completed in the first two years of the 10th Malaysian Plan (10MP). The mass rapid transit (MRT) system, which is the biggest infrastructure project in Malaysia, is one of the key entry point projects for the NKRA. Designed to significantly improve the coverage of rail-based public transport in the Klang Valley, it will enable 50% of all trips in the Klang Valley to be done on public transport by 2020, from the current 17%. Phase 1 of the project is expected to be completed in 2017. The LPT mode share is projected to increase from the current 12% to 25% when all the three MRT lines are completed, and to 40% by 2020. Apart from this, the existing Ampang and Kelana Jaya light railway transit (LRT) lines will also be extended. The Ampang line extension starts from the Seri Petaling station and passes through Kinrara and Puchong before ending at Putra Heights. The extension is 17.7km long with 12 new stations. Meanwhile, the Kelana Jaya line will begin from the Kelana Jaya station and pass through 13 new stations, including Subang Jaya and USJ, before ending at Putra Heights. The extension covers a distance of 17km. Both projects are expected to be completed in 2014.
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Figure 43: LRT extension alignment (Ampang and Kelana Jaya line)
SOURCES: CIMB, WWW.LRTEXTENSION.COM
Other plans include: Completion of the integrated transport terminal (ITT) in Bandar Tasik Selatan and construction of ITT in Gombak by 2012. Increasing transport capacity. Full delivery of 35 sets of new four-car trains will increase the capacity of the Kelang Jaya LRT line from 24k to 98k passengers/hour. Potential extension of the monorail system to improve connectivity between existing KTM Komuter, LRT and monorail systems. Implementation of 49km bus rapid transit (BRT) system in Kuala Lumpur and potential expansion to Iskandar in Johor. The estimated RM16.5bn high speed railway (HSR) linking Kuala Lumpur with Singapore to improve connectivity between the two cities.
As public transportation gradually improves, people should drive less. This should reduce the need for new private passenger vehicles. This can be deduced from the relatively low car penetration rate in more advanced countries, where the public transportation system is more comprehensive and developed. It is also evident in the lower vehicle density per km of road in cities such as Singapore, Hong Kong and London. We applaud the governments efforts to improve the countrys public transportation network. But we note that these efforts will take time to bear fruit. For example, the MRT will only be operational in 2017 while the LRT extension lines will only be completed in 2014, which is still a long wait. Also, much of the improvements in the public transport network are focused on the Greater KL/Klang Valley area, which means that other populous states, like Johor and Perak, still offer good potential for auto players. For now, we think that private cars will remain the dominant means of transport in Malaysia, although this trend looks set to shift.
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5.2 Improvements in highway network supply

We think another reason behind the rising vehicle penetration rate is the improving highway infrastructure in the country, which helps strengthen connectivity and shorten the time to commute between two places. The 10MP has outlined seven new highways to be built over the next 4-5 years. The total value of the seven highways is estimated to be RM19bn. Our checks indicate that three urban highways are already at the planning stages. They are the Sg. Besi Ulu Kelang Expressway (Suke), Damansara-Shah Alam Highway (Dash) and Kinrara-Damansara Expressway (Kidex).
Suke
Suke is a 31.8km, three-lane, dual-carriageway expressway that will start at Sri Petaling and pass through Sungai Besi, Alam Damai, Cheras-Kajang, Taman Bukit Permai, Taman Putra, Taman Permai Jaya, Taman Dagang Permai, Taman Kosas, Ampang dan Taman Hillview before ending at Ulu Kelang.
Figure 44: Details of Suke

Designation Length Total cost Total cost/km Total toll stops Total land to be acquired Construction period Concession period Concession owner Coverage area : : : : : : : : : : Sungai Besi-Ulu Kelang Elevated Expressway (SUKE) 31.8km, 3 lane, dual carriageway (fully elevated) Unknown Unknown 3 toll plazas,11 interchanges Unknown 4-5 years Unknown Projek Lintasan Kota Holdings Sdn Bhd (Prolintas) - 100%-owned by PNB Alternative route for MRRII, linking major highways in Eastern Klang Valley
Dash
Dash is a 20.1km, three-lane, dual-carriageway expressway that will commence at the Puncak Perdana U10 Shah Alam intersection and serve as a link for Puncak Perdana, Alam Suria, Denai Alam, Kampung Melayu Subang, Jalan Sungai Buloh, the Rubber Research Institute of Malaysia, Kota Damansara, Damansara Perdana and Mutiara Damansara. The expressway ends at the Penchala interchange.
Figure 45: Details of Dash

Designation Length Total cost Total cost/km Total toll stops Total land to be acquired Construction period Concession period Concession owner Coverage area : : : : : : : : : : Damansara-Shah Alam Highway (DASH) 20.1km, 3 lane, dual carriageway (fully elevated) Unknown Unknown 3 toll plazas,12 interchanges Unknown 4-5 years Unknown Projek Lintasan Kota Holdings Sdn Bhd (Prolintas) - 100%-owned by PNB Link between east and west of Klang Valley: Shah Alam to Damansara Perdana
Kidex
The Kinrara-Damansara Expressway (Kidex) will link Kinrara in Puchong and Pusat Bandar Damansara. The main purpose of this fully-elevated, 50km highway is to divert the heavy traffic on the Lebuhraya Damansara Puchong (LDP).
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Figure 46: Details of Kidex

Designation Length Total cost Total cost/km Total toll stops Total land to be acquired Construction period Concession period Concession owner Coverage area : : : : : : : : : : Kinrara-Damansara Expressway (KIDEX) 50km, 3 lane, dual carriageway (fully elevated) RM2.2bn RM44m 3 toll plazas,11 interchanges Unknown 4-5 years Unknown Unknown Kinrara-Damansara
5.3 Risk of fuel price hike

A hike in fuel prices will increase the running cost of a car and reduce affordability. In Malaysia, RON95, which is pumped by most motorists, retails at RM1.90 per litre (after a subsidy of RM1.09 per litre by the government). Our analysis below shows the impact on the cost of a full tank for vehicles of different engine capacities from a 1) 5 cents increase in RON95 from RM1.85 per litre to the current RM1.90, and 2) 10 cents increase in RON97 from RM2.80 per litre to the current RM2.90. The average impact is a 2.7% to 3.6% increase in cost. The government might not be able to fully absorb future fuel price increases, which means that there is the risk of higher fuel costs for consumers.
Figure 47: Impact of fuel price increase (5 sen for RON95, 10 sen for RON97)
Before RON95 Full tank RM 59.2 66.6 74.0 After RON95 Full tank RM 60.8 68.4 76.0 Change (RM) 1.60 1.80 2.00 Change % 2.7% 2.7% 2.7% Before RON97 Full tank RM 89.6 100.8 112.0 After RON97 Full tank RM 92.8 104.4 116.0 Change (RM) 3.20 3.60 4.00 Change % 3.6% 3.6% 3.6%
CC 659-989 Perodua Kancil Perodua Viva Perodua Myvi 1075-1597 Proton Savvy Perodua Myvi Toyota Avanza 1308-1498 Proton Gen 2 Proton Saga Honda Civic Toyota Vios Honda City Perodua Alza Toyota Avanza Toyota Rush 1584-1799 Proton Waja Proton Saga Nissan Latio Honda Civic Proton Exora Nissan Grand Livina
Fuel tank capacity (L) 32 36 40
40 40 45
74.0 74.0 83.3
76.0 76.0 85.5
2.00 2.00 2.25
2.7% 2.7% 2.7%
112.0 112.0 126.0
116.0 116.0 130.5
4.00 4.00 4.50
3.6% 3.6% 3.6%
50 40 50 42 42 42 45 50
92.5 74.0 92.5 77.7 77.7 77.7 83.3 92.5
95.0 76.0 95.0 79.8 79.8 79.8 85.5 95.0
2.50 2.00 2.50 2.10 2.10 2.10 2.25 2.50
2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%
140.0 112.0 140.0 117.6 117.6 117.6 126.0 140.0
145.0 116.0 145.0 121.8 121.8 121.8 130.5 145.0
5.00 4.00 5.00 4.20 4.20 4.20 4.50 5.00
3.6% 3.6% 3.6% 3.6% 3.6% 3.6% 3.6% 3.6%
60 40 52 50 55 52
111 74 96.2 92.5 101.75 96.2
114.0 76.0 98.8 95.0 104.5 98.8
3.00 2.00 2.60 2.50 2.75 2.60
2.7% 2.7% 2.7% 2.7% 2.7% 2.7%
168.0 112.0 145.6 140.0 154.0 145.6
174.0 116.0 150.8 145.0 159.5 150.8
6.00 4.00 5.20 5.00 5.50 5.20
3.6% 3.6% 3.6% 3.6% 3.6% 3.6%
SOURCES: CIMB
5.4 Risk of increase in hire purchase (HP) rates

A hike in HP rate is generally negative as it increases the loan servicing burden for buyers. HP rates usually track the trend in Bank Negara Malaysias (BNM) overnight policy rate (OPR). BNMs OPR now stands at 3% and our economics team is not projecting a change in 2H12. We believe BNM will maintain its accommodative monetary policy for an extended period on the back of continued caution about the external environment. For next year, we are
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projecting OPR to hover around 3-3.5%. But we think that an increase, if any, is unlikely to throw buyers vehicle purchasing off track, as long as it is done gradually. Our analysis shows that a moderate interest rate hike increases car buyers monthly payments by just a small amount. But it could be a cause for concern if it is accompanied by rising fuel prices and heightened economic worries.
Figure 48: Hire purchase structure (rates offered by CIMB Bank)

Margin of financing Financing tenure New car financing rates Types of vehicles Passenger vehicles Proton & Perodua Unregistered reconditioned New commercial vehicles Types of vehicles BTM up to 5,000 kg BTM more than 5,000 kg up to 90% of seller's invoice up to 9 years (108 months) Fixed rate (p.a. flat) 2.60% to 2.70% 3.10% to 3.60% 2.65% to 2.80% Fixed rate (p.a. flat) 3.25% to 3.60% 4.20% to 4.60%
SOURCES: CIMB
Figure 49: Impact of HP rate increase from 3.50% to 3.75% on yearly instalment
Old scenario @ 3.50% p.a. Year Interest Tenure 3.50% 5 Principal 70,000 Instalments 1,371 1 4,378 2 3,414 3 2,450 4 1,486 5 522 Total 12,250 Total 70,000 Total 82,250
1 2 3 4 5 12,072 13,036 14,000 14,964 15,928 1 2 3 4 5 16,450 16,450 16,450 16,450 16,450
New scenario @ 3.75% p.a. Year Interest Tenure 3.75% 5 Principal 70,000 Instalments 1,385 Increase /(Decrease) in yearly instalment (RM) Year 1 4,691 2 3,658 3 2,625 4 1,592 5 559 Total 13,125 Total 70,000 Total 83,125
1 2 3 4 5 11,934 12,967 14,000 15,033 16,066 1 2 3 4 5 16,625 16,625 16,625 16,625 16,625
1 175
2 175
3 175
4 175
5 175
Total 875
SOURCES: CIMB
5.5 Consumer sentiment will affect decisions to buy cars

The demand for vehicles is quite closely correlated with economic conditions via consumer sentiment. When times are bad, potential buyers are generally less willing to commit to big-ticket items. While the current state of the countrys public transport makes it almost a necessity to own cars for some, buyers may choose to defer purchases until the global economy recovers and job security improves. If conditions in the eurozone deteriorate more rapidly than expected, there could be sharp declines in the global asset markets and risk appetite. The spillover would dampen consumer sentiment and affect the willingness to buy cars.
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Figure 50: Correlation between auto industry index and vehicle sales
180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 180 160 140 120 100 80 60 40 20 0
Figure 51: Correlation between consumer sentiment index and vehicle sales
180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 20 0 100 80 60 40 140 120
Vehicle sales (LHS)
MIER auto industry index (RHS)
Vehicle sales (LHS)
Consumer sentiment index (RHS)
SOURCES: CIMB, MIER
SOURCES: CIMB, MIER
5.6 Lowering of trade and non-trade barriers welcome more competition

Since the birth of the national car project 25 years ago, the Malaysian auto industry has been highly protected. Compared to neighbouring countries, like Thailand, Malaysias auto industry is characterised by high trade and non-trade barriers that shield both the national and non-national auto players, which have invested substantially in car manufacturing and assembling operations in the country. Gradual liberalisation via the lowering of trade and non-trade barriers would mean intensifying competition for local car manufacturers and assemblers as the country becomes more open to investments from foreign car companies and imports of cars and car parts into the country.
6. VALUATION AND RECOMMENDATION 6.1 Maintain OVERWEIGHT on Malaysian autos

Thailand, Indonesia and Malaysia are the major demand centres for motorcars, thanks to rapid economic growth, accommodative government policies, an expanding middle-income group and rising disposable income, among other factors. Although all three countries have gained significant mileage in the auto sector in terms of the development of the industry, Indonesias and Thailands growth prospects, based on the opportunities for exports and vehicle penetration rates, seem to trump Malaysias. Still, the demand drivers for the Malaysian auto sector are intact. Favourable demographics in the form of a large working population and rising middle-income group, still-firm economic outlook, relatively low cost of vehicle ownership, low interest rate environment, the countrys dismal public transportation system and new model launches are among factors that should continue to support domestic buying interest. Further out, full liberalisation under AFTA and AEC in 2015 should enhance auto players export opportunities. This year, we are projecting total industry volume to scale a new high of 628,022 units. This implies a 4.7% growth from the 599,877 units recorded in the disaster-stricken 2010 and is 2.1% above the Malaysian Automotive Associations (MAA) projection of 615,000 units. Jan-May sales totalled 244,579 units. Sales in the remaining seven months of the year have to grow by about 11% yoy to hit our sales projection. We think this is achievable as we expect 1) vehicle supply to recover to meet pent-up demand, 2) new model launches to spur buying interest, and 3) banks to adapt to the tighter credit guidelines over time.
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Figure 52: Vehicle sales projection for 2012

2012 2011 % yoy change Jan-May 244,579 255,413 -4% Jun-Dec 383,443 344,464 11% Total 628,022 599,877 5%
SOURCES: CIMB, MAA
6.2 Company recommendation and target price basis

DRB Currently, VW cars, apart from the Passat, are imported into the country from Germany in CBU form, subjecting them to high excise and import duties. Hence, the start of the local assembly of VW models in Malaysia is a huge positive as it should, over time, drive selling prices down (from CBU price range to CKD-based pricing). The transition to CKD pricing will be gradual as it will depend on the scaling up of production in Pekan and DRBs ability to assemble more models. VWs sales have been doing well even before the CKD operations gained traction. We expect VW to gain market share, possibly planting itself permanently at the top of the premium segment. We see DRB, which has become an auto giant after the recent acquisition of Proton, as one of the key beneficiaries of Malaysias positive demand drivers. With VW on one end of the spectrum, Proton on the other and Honda in the middle, DRB seems well-positioned to capture potential vehicle upgrades as income levels increase. Growth will also come from abroad as VW penetrates the ASEAN market, with DRB its partner of choice. We retain our Outperform call on DRB with an unchanged SOP-based target price of RM4.10. Current valuations provide a good entry point to ride the groups strategic transformation story. DRB remains our preferred pick in the sector.
Figure 53: DRB - Breakdown of RNAV

Business Automotive Concessions Bank Muamalat POS Malaysia Commercial property assets Landbank for development Total Net debt No. of shares (m) RNAV per share Method 10.9x CY13 PE book value 1.4x CY12 P/B at cost book value book value RMm 7,145 978 2,303 623 748 1,501 13,298 (3,374) 1,933 5.13
SOURCES: CIMB
UMW Holdings UMW has two of the strongest vehicle franchises under its belt, i.e. Perodua and Toyota, both market leaders in their own segments (national and non-national) in Malaysia. And both look set to retain their leadership positions this year. Our optimism on Toyota stems from the strong momentum for its sales so far. Toyotas vehicle sales have trumped its two major Japanese peers in the first five months of the year. We think the sales momentum should persist in the months ahead given the supply recovery, which should meet pent-up demand, and boost from new models such as Toyota Avanza, Prius C and the upcoming Toyota Camry. Honda has only just recovered from the supply shocks caused by the Thai floods while Nissan will not have any major models launched until year-end. For Perodua, its sales will continue to be supported by the success of the new Myvi, which is the countrys best-selling model. Similar to DRB, UMW straddles both the national and non-national segments. This allows it to capture future potential vehicle upgrades, be it new buyers seeking for entry-level cars or existing owners looking to upgrade to a non-national brand.
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Export opportunities for UMW Toyota do not look as compelling as it does for DRB or Tan Chong. Unlike DRB, which will play a role in driving VWs ASEAN aspirations, or Tan Chong, which is Nissans vehicle in the growing Indochina, UMW Toyotas move abroad will be limited by its principal Toyota Motor Corps direct presence in the key automotive markets, such as Thailand and Indonesia. But we think UMW will stand to benefit if Malaysia is made the hub for the production of selected models for onward exports to other countries in the region. We are positive on UMW Toyotas launch of hybrid vehicles like the Prius C, Prius and the Lexus CT200h as they gave it a headstart in terms of the offering of eco-friendly vehicles in the country. As the Malaysian government steps up on the development of the green industry in the country, more incentives to promote green technology can be expected, which will ultimately benefit first-movers like UMW Toyota. UMW offers the highest yield among the auto stocks under coverage, which is especially appealing in volatile economic conditions. The company is trading at forward P/E of only 12x, below its historical average of 13x. We retain our Outperform call on UMW with an unchanged SOP-based target price of RM9.55.
Figure 54: UMW - SOP table

FY13 Net profit (RM'm) 607.4 140.3 170.6 Target P/E 13.0 13.0 10.0 RNAV (RM'm) 7,896.7 1,824.4 1,706.4 (291.4) 11,136.1 1,168 9.55
Automotive Oil & gas Equipment + manufacturing Net cash + others Total RNAV No of shares ('m) RNAV/share (RM)
Tan Chong We think that Tan Chongs market share will be under pressure as it will not be releasing any major new models until at least the end of the year. Its presence in Indochina is a good diversification strategy for new growth opportunities. But earnings are unlikely to be meaningful in the near term. Despite the absence of meaningful corporate developments, its weak quarterly results and its tepid monthly sales performance, its share price has done surprisingly well, rising 11% YTD relative to the KLCIs 5% gain. We see few near-term catalysts that could further re-rate the stock. We retain our Underperform call on Tan Chong with an unchanged SOP-based target price of RM4.20.
Figure 55: Tan Chong - SOP table

Valuation method PE of 9x FY13 core net profits (RM'm) 322.1 Value (RM'm) 3,014.6 80.0 281.3 2,813.3 672.0 4.20
Automotive division Segambut landbank Net debt as at end-Dec 11 Total value No. of shares (m) Target price
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6.3 Appendix 1
Figure 56: Market share (passenger vehicle sales) among ASEAN-6 countries in 2011 Figure 57: Market share (commercial vehicle sales) among ASEAN-6 countries in 2011
Thailand 23% Singapore 2%
Brunei 1% Indonesia 37%

Thailand 48%
Brunei 0% Indonesia 33%
Philippine 3%
Singapore 1% Philippine 11%
Malaysia 7%
Malaysia 34%
6.4 Appendix 2
Figure 58: Market share of car brands in Malaysia
Makes Perodua Proton Toyota Honda Nissan Mitsubishi Naza Isuzu Volkswagen Suzuki Ford Hyundai Mazda Mercedes Benz Hino Peugeot Hyundai/Inokom BMW Chery Daihatsu Mitsubishi Fuso Kia Lexus Hicom Perkasa Chevrolet Volvo Audi Scania Porsche Mini Man Ssangyong Bison Land Rover Renault JBC Dongfeng Subaru Mahindra Tuah Total Passenger 179,989 158,601 63,493 32,480 25,504 3,754 9,347 7,350 7,308 4,839 6,469 5,716 5,439 5,345 3,818 5,000 2,997 1,741 1,711 1,272 801 927 415 301 244 133 91 17 10 535,112 Commercial 56 23,458 6,772 8,299 9,299 2,349 312 271 5,584 1,519 2,118 1,756 1,518 205 483 277 13 239 87 41 87 19 3 64,765 Total 179,989 158,657 86,951 32,480 32,276 12,053 9,347 9,299 7,350 7,308 7,188 6,469 6,028 5,710 5,584 5,345 5,337 5,000 2,997 2,118 1,756 1,741 1,711 1,518 1,272 1,006 927 483 415 301 277 257 239 220 132 87 19 17 10 3 599,877 Market share 30.0% 26.4% 14.5% 5.4% 5.4% 2.0% 1.6% 1.6% 1.2% 1.2% 1.2% 1.1% 1.0% 1.0% 0.9% 0.9% 0.9% 0.8% 0.5% 0.4% 0.3% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
SOURCES: CIMB, MAA
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6.5 Appendix 3
Figure 59: Malaysian duty structure
A) Motor cars CBU ASEAN CEPT 0% 0% 0% 0% Import duty CKD MFN ASEAN CEPT 10% 0% 10% 0% 10% 0% 10% 0% Local taxes MSP CBU & CKD ASEAN CEPT Excise Sales n.a. 75% 10% n.a. 80% 10% n.a. 90% 10% n.a. 105% 10%
Engine capacity (cc) < 1800 1800 - 1999 2000 - 2499 Above 2500
MFN 30% 30% 30% 30%
MFN 10% 10% 10% 10%
B) Four Wheel Drive Vehicle CBU ASEAN CEPT 0% 0% 0% 0% Import duty CKD MFN ASEAN CEPT 10% 0% 10% 0% 10% 0% 10% 0% Local taxes MSP CBU & CKD ASEAN CEPT Excise Sales n.a. 65% 10% n.a. 75% 10% n.a. 90% 10% n.a. 105% 10%
Engine capacity (cc) < 1800 1800 - 1999 2000 - 2499 Above 2500
MFN 30% 30% 30% 30%
MFN 10% 10% 10% 10%
C) Others (MPV & Van) CBU ASEAN CEPT 0% 0% 0% 0% 0% Import duty CKD MFN ASEAN CEPT NIL 0% 10% 0% 10% 0% 10% 0% 10% 0% Local taxes MSP CBU & CKD ASEAN CEPT Excise Sales n.a. 60% 10% n.a. 65% 10% n.a. 75% 10% n.a. 90% 10% n.a. 105% 10%
Engine capacity (cc) < 1500 1500 - 1799 1800 - 1999 2000 - 2499 Above 2500
MFN 30% 30% 30% 30% 30%
MFN NIL 10% 10% 10% 10%
D) Commercial vehicles Import duty Local taxes CBU CKD MSP CBU & CKD MFN ASEAN CEPT MFN ASEAN CEPT MFN ASEAN CEPT Excise Sales 30% 0% NIL 0% NIL n.a. NIL 10%
Engine capacity (cc) All
SOURCES: CIMB, MAA
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Conglomerate MALAYSIA
June 26, 2012
DRB-Hicom
DRB MK / DRBH.KL Current RM2.55 RM4.10 RM4.10 60.8%
SHORT TERM (3 MTH) LONG TERM
Market Cap
Avg Daily Turnover
Free Float
Target Previous Target Up/downside
US$1,543m
RM4,930m
US$3.33m
RM10.31m
43.0%
1,933 m shares
Convicti
CIMB Analyst Loke Wei Wern
Structural transformation story

DRB-Hicom has a lot on its plate and the sudden dearth of newsflow reflects the task of transforming the various assets at hand. We believe that its share price inactivity during this interim period is a good entry point for a long-term restructuring play.
We maintain our Outperform call and SOP-based target price. Apart from autos, we see potential rerating catalysts in its plans for POS Malaysia, Bank Muamalat and the property development division. DRB is our top pick in the sector. sizeable market to tap. It has made it possible for foreign players to set up production bases and export hubs in the region. Again, DRB is a prime beneficiary of this. Being Volkswagen AGs (VW) partner of choice, DRB is well-positioned to ride on the latters ASEAN aspirations. It is understood that the assembly of VW CKDs will first be for the Malaysian market and then for the ASEAN region as part of VWs Strategy 2018 programme.
Lucius Chong
T (60) 3 20849869 E lucius.chong@cimb.com
Share price info

Share price perf. (%) Relative Absolute Major shareholders Etika Strategi EPF 1M 2.4 5.8 3M -1.1 0 12M 10.8 13.3 % held 55.9 7.7
Well-positioned to ride on rising income levels

We see DRB, which has become an auto giant after the recent acquisition of Proton, as one of the key beneficiaries of Malaysias positive demand driver. With VW on one end of the spectrum, Proton on the other and Honda in the middle, DRB seems well-positioned to capture potential vehicle upgrades as income levels increase.
Transformation for POS Malaysia

POS Malaysia recently released its 5-year strategic plan, following its takeover by DRB-Hicom late last year. The headline financial targets were 1) consecutive double-digit revenue growth right up to 2017, 2) improving its current pretax margins of 12% by a lot higher and 3) exploring new investments and M&A opportunities. Putting the sales growth targets and margin expansion together implies a doubling of sales and a tripling of profits within the 5-year plan.
Compelling export opportunities

Liberalisation under AFTA-CEPT has opened up opportunities for the Malaysian auto sector. The low duties applied across all ASEAN countries provide auto players a much more
Price Close 3.0 2.5 2.0 1.5 40 30 20 10

Jun-11 Source: Bloomberg Sep-11 Dec-11
Relative to FBMKLCI (RHS)
Vol m
151 143 135 128 120 112 104 97 89 81
Financial Summary
Revenue (RMm) Operating EBITDA (RMm) Net Profit (RMm) Core EPS (RM) Core EPS Growth FD Core P/E (x) DPS (RM) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) Recurring ROE % Change In Core EPS Estimates CIMB/consensus EPS (x) Mar-11A 6,804 379 473 0.21 39% 11.89 0.044 1.72% (19.96) 6.76 (134%) 0.99 7.39% Mar-12A 6,878 1,680 1,292 0.17 (22%) 15.33 0.045 1.77% (5.57) NA (113%) 0.69 4.60% Mar-13F 18,759 1,270 665 0.34 107% 7.42 0.050 1.97% (5.20) 0.95 (30%) 0.44 6.84% 0.000% 1.36 Mar-14F 19,774 1,651 862 0.45 30% 5.72 0.059 2.30% (4.30) 5.72 (34%) 0.44 7.70% 0.000% 1.49 Mar-15F 20,288 1,830 954 0.49 11% 5.17 0.068 2.65% (2.15) NA (10%) 0.43 7.92% 0.000% 1.38
Mar-12
52-week share price range

2.55 1.67 3.17
Current
Target
4.10
SOURCE: CIMB, COMPANY REPORTS
DRB-Hicom
June 26, 2012
Profit & Loss

(RMm) Revenue Cost Of Sales Gross Profit Total Operating Costs Operating Profit Operating EBITDA Depreciation And Amortisation Operating EBIT Net Interest Income Exchange Gains Other Income Associates' Profit Profit Before Tax (pre-EI) Exceptional Items Pre-tax Profit Taxation Profit After Tax Minority Interests Net Profit Recurring Net Profit Mar-12A 6,878 (5,223) 1,655 (192) 1,463 1,680 (216.6) 1,463 (110.1) 79.9 87.8 1,521 0.00 1,521 (148.0) 1,373 (80.1) 1,292 321.5 Mar-13F 18,759 (15,919) 2,840 (1,926) 914 1,270 (356.1) 914 (293.0) 84.5 211.4 917 0.00 917 (179.4) 738 (73.1) 665 664.6 Mar-14F 19,774 (16,513) 3,261 (2,023) 1,237 1,651 (413.8) 1,237 (265.3) 89.5 249.4 1,311 0.00 1,311 (354.0) 957 (94.8) 862 862.2 Mar-15F 20,288 (16,812) 3,477 (2,125) 1,352 1,830 (478.6) 1,352 (346.4) 89.5 249.4 1,344 0.00 1,344 (279.2) 1,065 (110.7) 954 954.2
Balance Sheet
(RMm) Fixed Assets Intangible Assets Other Long Term Assets Total Non-current Assets Total Cash And Equivalents Inventories Accounts Receivable Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Total Long-term Debt Other Liabilities Deferred Tax Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Mar-12A 1,974 205 21,212 23,391 11,461 1,517 2,805 493 16,276 619 330.5 25,941 26,890 1,678 2,642 85.2 4,406 7,139 1,232 8,371 Mar-13F 7,507 1,664 18,494 27,664 8,860 2,948 4,359 498 16,666 2,477 265.6 22,439 25,181 4,813 1,800 104.6 6,717 11,127 1,305 12,432 Mar-14F 8,311 2,017 19,475 29,803 9,784 2,373 4,943 5,336 22,436 2,966 200.7 29,294 32,461 5,212 1,757 124.0 7,093 11,286 1,400 12,685 Mar-15F 10,115 162 21,572 31,848 7,134 2,435 4,943 508 15,020 2,966 135.8 23,284 26,385 5,676 1,772 143.4 7,591 11,381 1,511 12,892
Cash Flow
(RMm) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Other Operating Cashflow Cashflow From Operations Capex Disposals Of FAs/subsidiaries Acq. Of Subsidiaries/investments Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Net Cash Interest Other Financing Cashflow Cash Flow From Financing Total Cash Generated Change In Net Cash Free Cashflow To Equity Mar-12A 1,521 239.0 (120) (148.0) (1,189) 302 (350) 8.20 (623) (3,720) (4,685) 2,070 (119.2) (110.1) 1,896 3,736 (647) (2,716) (2,423) Mar-13F 917 437.7 2,704 (179.4) (490) 3,389 (1,450) 5.70 (3,000) 0 (4,445) 6,534 (132.9) (293.0) (5,433) 675 (380) (6,914) 5,186 Mar-14F 1,311 429.8 472 (354.0) (84) 1,775 (1,650) 3.20 0 0 (1,647) 999 (155.2) (265.3) (6) 572 700 (299) 862 Mar-15F 1,344 575.7 (176) (279.2) (515) 950 (1,850) 3.20 0 0 (1,847) 1,064 (130.8) (346.4) (2,422) (1,835) (2,732) (3,796) (180)
Key Ratios
Revenue Growth Operating EBITDA Growth Operating EBITDA Margin Net Cash Per Share (RM) BVPS (RM) Gross Interest Cover Tax Rate Net Dividend Payout Ratio Accounts Receivables Days Inventory Days Accounts Payables Days ROIC (%) ROCE (%) Mar-12A 1% 343% 24.4% 4.89 3.69 9.57 9.7% 6.7% 162.0 79.57 43.07 (29.4%) 17.0% Mar-13F 173% (24%) 6.8% 1.96 5.76 2.71 19.6% 14.6% 69.7 51.19 35.49 (74.5%) 6.9% Mar-14F 5% 30% 8.4% 2.26 5.84 3.96 27.0% 13.1% 85.9 58.81 60.15 (41.7%) 7.2% Mar-15F 3% 11% 9.0% 0.68 5.89 3.40 20.8% 13.7% 88.9 52.19 64.40 (48.5%) 7.6%
Key Drivers
Rev. growth (%, main biz.) EBITDA mgns (%, main biz.) Rev. as % of total (main biz.) EBITDA as % of total (main biz.) Rev. growth (%, 2ndary biz.) EBITDA mgns (%, 2ndary biz.) Rev. as % of total (2ndary biz.) EBITDA as % of total (2ndary biz.) Rev. growth (%, tertiary biz.) EBITDA mgns (%, tertiary biz.) Rev.as % of total (tertiary biz.) EBITDA as % of total (tertiary biz.) Mar-12A 0.1% 6.3% 59.0% 32.2% 6.7% 43.7% 19.0% 43.7% N/A N/A N/A N/A Mar-13F 257.9% 8.5% 77.4% 65.2% 6.7% 27.7% 7.4% 27.7% N/A N/A N/A N/A Mar-14F 6.2% 9.0% 78.1% 59.9% 6.8% 24.0% 7.5% 24.0% N/A N/A N/A N/A Mar-15F 2.7% 10.2% 78.1% 71.9% 6.8% 25.6% 7.8% 25.6% N/A N/A N/A N/A
36
Autos MALAYSIA
June 26, 2012
Tan Chong Motor Holdings

TCM MK / TNCS.KL Current RM4.50 RM4.20 RM4.20 -6.7%
Market Cap
Avg Daily Turnover
Free Float
US$946.4m
RM3,024m
US$0.24m
RM0.74m
49.6%
672.0 m shares
Convicti
In the slow lane

Tan Chongs new models such as the Navara Single Cab and NV200 Vanette have failed to give Nissans sales the much-needed boost. In the absence of major model launches until year-end, Tan Chongs market share could be under pressure over the next few months.
We maintain our Underperform call and SOP-based target price. Potential derating catalysts include 1) market share loss and 2) margin compression from a stronger US$ and intensifying competition. We like DRB and UMW for exposure to the auto sector. year. As such, Tan Chongs market share could be under pressure.
Foothold in Indochina
Tan Chongs planting of a foothold in Indochina is a good diversification strategy though earnings are unlikely to be meaningful in the near term. Nissan Vietnam Ltd (NVL) registered an operating loss before depreciation and amortisation of RM6m for FY11. We expect NVL to remain in the red this year. That said, Tan Chongs entry into Vietnam is positive in the long term. Vietnam is a promising market with 86m people but a low penetration rate of only eight vehicles per 1,000 persons.
Share price info

Share price perf. (%) Relative Absolute Major shareholders Tan Chong Consolidated Nissan Motor Corp Employees Provident Fund 1M -3.4 0 3M -1.1 0 12M -6.4 -3.9 % held 44.8 5.6 7.2
Market share could be under pressure

Among the top three Japanese brands, i.e. Toyota, Honda and Nissan, Toyota is the most active in terms of new model launches. Honda is playing catch-up now that production has restarted. It has launched the Honda City facelift. The next major model launch will be the all-new Honda Civic. Meanwhile, Tan Chong has launched the Navara Single Cab and NV200 Vanette. But going by the latest monthly sales statistics, these new models have failed to give Nissans sales the much-needed boost, unlike its peers new model launches. We are not expecting any major model launches until the B-segment model is launched at the end of the
Lack of near-term catalysts

Despite the absence of meaningful corporate developments, Tan Chongs weak quarterly results and its tepid monthly sales performance, its share price has done surprisingly well, rising 11% YTD vs. 4% for the KLCI. In view of the lack of rerating catalysts, we retain our Underperform call on the stock.
5.3 5.1 4.9 4.7 4.5 4.3 4.1 Vol m 3.9 4 3 2 1

Jun-11
Price Close
116 112 107 103 99 95 90 86
Financial Summary
Revenue (RMm) Operating EBITDA (RMm) Net Profit (RMm) Core EPS (RM) Core EPS Growth FD Core P/E (x) DPS (RM) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) Recurring ROE % Change In Core EPS Estimates CIMB/consensus EPS (x) Dec-10A 3,505 406.8 244.2 0.36 59.3% 12.38 0.09 2.00% 8.05 37.41 15.5% 1.80 15.3% Dec-11A 3,854 386.3 216.1 0.32 (11.5%) 13.99 0.09 2.00% 8.51 17.80 14.8% 1.64 12.3% Dec-12F 4,154 376.4 207.0 0.31 (4.3%) 14.61 0.10 2.17% 8.75 49.32 14.1% 1.53 10.8% 0.000% 0.78 Dec-13F 5,126 525.9 322.1 0.48 55.6% 9.39 0.11 2.33% 6.61 NA 20.6% 1.35 15.3% 0.000% 0.99 Dec-14F 5,405 590.7 366.2 0.55 13.7% 8.26 0.11 2.50% 5.73 15.36 14.7% 1.20 15.4% 0.000% 1.03
Sep-11
Dec-11
Mar-12
Source: Bloomberg

4.04
4.50 5.08
Current
4.20
Target
Tan Chong Motor Holdings

June 26, 2012
Profit & Loss

(RMm) Revenue Cost Of Sales Gross Profit Total Operating Costs Operating Profit Operating EBITDA Depreciation And Amortisation Operating EBIT Net Interest Income Exchange Gains Other Income Associates' Profit Profit Before Tax (pre-EI) Exceptional Items Pre-tax Profit Taxation Profit After Tax Minority Interests Net Profit Recurring Net Profit Dec-11A 3,854 (2,914) 940 (622.5) 317.9 386.3 (68.41) 317.9 (13.84) 0.97 305.0 305.0 (89.6) 215.4 0.72 216.1 216.1 Dec-12F 4,154 (3,150) 1,003 (698.6) 304.4 376.4 (71.91) 304.4 (10.79) 0.97 294.6 294.6 (88.4) 206.2 0.72 207.0 207.0 Dec-13F 5,126 (3,927) 1,199 (752.7) 446.5 525.9 (79.44) 446.5 (9.98) 0.97 437.5 437.5 (109.4) 328.1 (6.03) 322.1 322.1 Dec-14F 5,405 (4,100) 1,305 (805.4) 499.6 590.7 (91.05) 499.6 (13.22) 0.97 487.4 487.4 (121.8) 365.5 0.72 366.2 366.2
Balance Sheet
(RMm) Fixed Assets Intangible Assets Other Long Term Assets Total Non-current Assets Total Cash And Equivalents Inventories Accounts Receivable Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Total Long-term Debt Other Liabilities Deferred Tax Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-11A 696.3 457.7 1,154 526.8 960 396.9 1,884 325.6 520.0 5.76 851 280.0 57.13 337.1 1,841 8.31 1,849 Dec-12F 724.4 457.7 1,182 544.9 1,029 539.1 2,113 388.6 546.0 26.87 961 280.0 57.13 337.1 1,982 8.31 1,991 Dec-13F 845.0 458.7 1,304 390.4 1,272 677.5 2,340 479.6 573.3 26.52 1,079 280.0 57.13 337.1 2,234 8.31 2,242 Dec-14F 953.9 459.7 1,414 508.8 1,349 727.8 2,586 505.7 602.0 32.81 1,140 280.0 57.13 337.1 2,524 8.31 2,533
Cash Flow
(RMm) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Other Operating Cashflow Cashflow From Operations Capex Disposals Of FAs/subsidiaries Acq. Of Subsidiaries/investments Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Net Cash Interest Other Financing Cashflow Cash Flow From Financing Total Cash Generated Change In Net Cash Free Cashflow To Equity Dec-11A 305.0 81.3 25.5 (91.7) (193.8) 126.4 (176.2) 126.3 (50.0) 93.48 (35.28) 32.81 91.00 167.4 73.9 169.9 Dec-12F 294.6 81.7 (148.2) (89.6) (3.0) 135.6 (100.0) (0.3) (100.3) 26.00 (60.48) 17.31 (17.17) 18.1 (7.9) 61.3 Dec-13F 437.5 88.4 (290.7) (88.4) (33.3) 113.5 (200.0) (0.3) (200.3) 27.30 (65.52) (29.58) (67.80) (154.6) (181.9) (59.5) Dec-14F 487.4 103.3 (101.4) (109.4) (11.5) 368.4 (200.0) (0.3) (200.3) 28.67 (70.56) (7.81) (49.70) 118.4 89.8 196.8
Key Ratios
Revenue Growth Operating EBITDA Growth Operating EBITDA Margin Net Cash Per Share (RM) BVPS (RM) Gross Interest Cover Tax Rate Net Dividend Payout Ratio Accounts Receivables Days Inventory Days Accounts Payables Days ROIC (%) ROCE (%) Dec-11A 10.0% (5.0%) 10.0% (0.41) 2.74 12.76 29.4% 28.0% 34.82 123.1 38.37 11.3% 13.0% Dec-12F 7.8% (2.6%) 9.1% (0.42) 2.95 11.20 30.0% 31.7% 41.24 115.5 41.48 10.4% 11.7% Dec-13F 23.4% 39.7% 10.3% (0.69) 3.32 15.91 25.0% 21.9% 43.31 107.0 40.35 14.3% 15.7% Dec-14F 5.4% 12.3% 10.9% (0.56) 3.76 17.23 25.0% 20.6% 47.45 116.7 43.86 14.2% 15.8%
Key Drivers
ASP (% chg, main prod./serv.) Unit sales grth (%, main prod./serv.) Util. rate (%, main prod./serv.) ASP (% chg, 2ndary prod./serv.) Unit sales grth (%,2ndary prod/serv) Util. rate (%, 2ndary prod/serv) ASP (% chg, tertiary prod/serv) Unit sales grth (%,tertiary prod/serv) Util. rate (%, tertiary prod/serv) Dec-11A N/A -7.2% 80.0% N/A N/A N/A N/A N/A N/A Dec-12F N/A 10.2% 80.0% N/A N/A N/A N/A N/A N/A Dec-13F N/A 29.5% 80.0% N/A N/A N/A N/A N/A N/A Dec-14F N/A 2.8% 80.0% N/A N/A N/A N/A N/A N/A
38
Autos MALAYSIA
June 26, 2012
UMW Holdings
UMWH MK / UMWS.KL Current RM9.02 RM9.55 RM9.55 5.9%
Market Cap
Avg Daily Turnover
Free Float
US$3,298m
RM10,538m
US$9.19m
RM28.58m
37.3%
1,168 m shares
Convicti
From strength to strength

UMW straddles both the national and non-national segments, allowing it to capture potential vehicle upgrades spurred by rising disposable incomes. Also encouraging is its YTD vehicle sales, which have trumped its two major Japanese peers.
We maintain our Outperform call and SOP-based target price of RM9.55. Potential rerating catalysts include 1) a stronger-than-expected recovery in O&G earnings and 2) investors flight to high-yield stocks. the country, more eco-friendly incentives can be expected, which will ultimately benefit first movers like UMW Toyota.
Share price info

Share price perf. (%) Relative Absolute Major shareholders Permodalan Nasional Bhd EPF BBH and Co. Boston 1M 12.4 15.8 3M 23.7 24.8 12M 23.1 25.6 % held 53.0 9.7 2.9
Secured by two of the strongest franchises

UMW has two of the strongest vehicle franchises under its belt, i.e. Perodua and Toyota, both market leaders in their own segments (national and non-national) in Malaysia. Both look set to retain their leadership positions this year. Our optimism over Toyota stems from the strong momentum for its sales so far, which trump its two major Japanese peers. For Perodua, its sales will continue to be supported by the success of the new Myvi, which is still the countrys bestselling model. We are also positive on the hybrid models under UMW Toyotas stable, i.e. the Prius C, Prius and Lexus CT200h. As the Malaysian government steps up the development of the green industry in
Time for O&G division to play catch-up

The O&G division rebounded from a RM45m pretax loss in 4Q11 to a RM54m pretax profit in 1Q12. We believe that this division has bottomed and its performance should improve on the back of higher day rates for Naga 3 (from Apr 12) and stronger contribution from associates such as USTPL and Zhongyou BSS. UMWs O&G division should also be an indirect beneficiary of the various O&G projects under the Economic Transformation Programme (ETP).
Support from good yields

UMWs share price has done very well since our upgrade, outperforming the KLCI by 20%. UMWs good yields should provide support to its share price.
9.5 9.0 8.5 8.0 7.5 7.0 6.5 6.0 10 8 6 4 2

Jun-11
Price Close
126 121 116 111 106 101 96 91
Financial Summary
Revenue (RMm) Operating EBITDA (RMm) Net Profit (RMm) Core EPS (RM) Core EPS Growth FD Core P/E (x) DPS (RM) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) Recurring ROE % Change In Core EPS Estimates CIMB/consensus EPS (x) Dec-10A 12,820 1,491 526.9 0.55 58.1% 16.28 0.30 3.33% 8.02 12.52 9.27% 2.58 15.9% Dec-11A 13,530 1,580 503.0 0.57 4.1% 15.73 0.31 3.46% 7.65 20.32 6.45% 2.44 15.8% Dec-12F 14,437 1,824 834.8 0.72 27.2% 12.46 0.43 4.81% 6.68 9.26 1.93% 2.26 18.8% 0.000% 1.02 Dec-13F 14,967 1,931 872.4 0.76 4.5% 11.93 0.45 5.03% 6.39 14.52 (1.08%) 2.10 18.3% 0.000% 0.95 Dec-14F 15,522 2,027 926.6 0.80 6.2% 11.23 0.49 5.43% 6.14 13.03 (4.32%) 1.96 18.1% 0.000% 0.92
Vol m
Sep-11
Dec-11
Mar-12
Source: Bloomberg

6.34
9.02 9.02
Current
Target
9.55
UMW Holdings
June 26, 2012
Profit & Loss

(RMm) Revenue Cost Of Sales Gross Profit Total Operating Costs Operating Profit Operating EBITDA Depreciation And Amortisation Operating EBIT Net Interest Income Exchange Gains Other Income Associates' Profit Profit Before Tax (pre-EI) Exceptional Items Pre-tax Profit Taxation Profit After Tax Minority Interests Net Profit Recurring Net Profit Dec-11A 13,530 (10,348) 3,182 (1,902) 1,280 1,580 (300.1) 1,280 (24.55) 125.7 1,381 1,381 (418.1) 963 (460.2) 503.0 656.3 Dec-12F 14,437 (11,042) 3,396 (1,898) 1,497 1,824 (326.7) 1,497 (19.13) 192.5 1,671 1,671 (384.3) 1,287 (451.8) 834.8 834.8 Dec-13F 14,967 (11,447) 3,520 (1,950) 1,570 1,931 (360.7) 1,570 (12.05) 234.2 1,792 1,792 (448.0) 1,344 (471.8) 872.4 872.4 Dec-14F 15,522 (11,871) 3,651 (2,020) 1,630 2,027 (396.7) 1,630 (5.64) 266.9 1,892 1,892 (473.2) 1,419 (492.0) 926.6 926.6
Balance Sheet
(RMm) Fixed Assets Intangible Assets Other Long Term Assets Total Non-current Assets Total Cash And Equivalents Inventories Accounts Receivable Other Current Assets Total Current Assets Trade Creditors Short-term Debt Other Current Liabilities Total Current Liabilities Total Long-term Debt Other Liabilities Deferred Tax Total Non-current Liabilities Shareholders' Equity Minority Interests Preferred Shareholders Funds Total Equity Dec-11A 3,079 204.2 1,892 5,175 2,209 1,474 893.5 725.6 5,302 1,132 658.2 1,081 2,872 1,910 78.56 32.00 2,021 4,263 1,321 5,584 Dec-12F 3,379 204.2 1,988 5,571 2,139 1,572 916.8 567.1 5,196 1,088 540.6 1,051 2,680 1,719 78.56 32.00 1,830 4,597 1,660 6,257 Dec-13F 3,752 204.2 2,085 6,041 2,110 1,630 950.5 579.3 5,270 1,128 487.5 1,078 2,693 1,547 78.56 32.00 1,658 4,946 2,014 6,960 Dec-14F 4,091 204.2 2,181 6,477 2,164 1,690 985.7 592.1 5,433 1,170 439.8 1,106 2,715 1,393 78.56 32.00 1,503 5,308 2,383 7,691
Cash Flow
(RMm) Pre-tax Profit Depreciation And Non-cash Adj. Change In Working Capital Tax Paid Other Operating Cashflow Cashflow From Operations Capex Disposals Of FAs/subsidiaries Acq. Of Subsidiaries/investments Other Investing Cashflow Cash Flow From Investing Debt Raised/(repaid) Equity Raised/(Repaid) Dividends Paid Net Cash Interest Other Financing Cashflow Cash Flow From Financing Total Cash Generated Change In Net Cash Free Cashflow To Equity Dec-11A 1,381 199.0 (76.1) (340.4) 37.9 1,202 (590.3) (96.55) 136.4 (550.4) (114.8) 0.0 (438.1) (24.55) (218.0) (795.4) (144.2) (29.4) 512 Dec-12F 1,671 153.3 (36.8) (418.1) 778.7 2,148 (600.0) (96.55) 0.0 (696.6) (308.7) 0.0 (500.9) (19.13) (140.8) (969.5) 482.0 790.7 1,124 Dec-13F 1,792 138.5 (37.0) (384.3) 240.6 1,750 (700.0) (96.55) 0.0 (796.6) (225.0) 0.0 (523.4) (12.05) (222.1) (982.5) (29.1) 195.9 716 Dec-14F 1,892 135.4 (38.7) (448.0) 262.9 1,803 (700.0) (96.55) 0.0 (796.6) (202.5) 0.0 (556.5) (5.64) (188.9) (953.6) 53.1 255.6 799
Key Ratios
Revenue Growth Operating EBITDA Growth Operating EBITDA Margin Net Cash Per Share (RM) BVPS (RM) Gross Interest Cover Tax Rate Net Dividend Payout Ratio Accounts Receivables Days Inventory Days Accounts Payables Days ROIC (%) ROCE (%) Dec-11A 5.5% 6.0% 11.7% (0.31) 3.70 14.71 30.3% 71.5% 23.03 50.62 37.01 13.4% 16.7% Dec-12F 6.7% 15.4% 12.6% (0.10) 3.99 18.31 23.0% 60.0% 22.95 50.49 36.80 16.5% 18.7% Dec-13F 3.7% 5.8% 12.9% 0.07 4.29 21.58 25.0% 60.0% 22.77 51.05 35.33 16.1% 18.6% Dec-14F 3.7% 5.0% 13.1% 0.29 4.60 24.89 25.0% 61.0% 22.77 51.04 35.32 15.8% 18.3%
Key Drivers
ASP (% chg, main prod./serv.) Unit sales grth (%, main prod./serv.) Util. rate (%, main prod./serv.) ASP (% chg, 2ndary prod./serv.) Unit sales grth (%,2ndary prod/serv) Util. rate (%, 2ndary prod/serv) ASP (% chg, tertiary prod/serv) Unit sales grth (%,tertiary prod/serv) Util. rate (%, tertiary prod/serv) Dec-11A -0.7% -1.4% N/A N/A N/A N/A N/A N/A N/A Dec-12F 1.0% 3.7% N/A N/A N/A N/A N/A N/A N/A Dec-13F 0.0% 4.4% N/A N/A N/A N/A N/A N/A N/A Dec-14F 0.0% 4.4% N/A N/A N/A N/A N/A N/A N/A
40
AUTOS
June 26, 2012
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Unless permitted to do so by the securities laws of Hong Kong, no person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong). Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (CIMBI). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBI has no obligation to update its opinion or the information in this research report. 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If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB. New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their
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business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978. Singapore: This report is issued and distributed by CIMB Research Pte Ltd (CIMBR). Recipients of this report are to contact CIMBR in Singapore in respect of any matters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR. As of June 25, 2012, CIMB Research Pte Ltd does not have a proprietary position in the recommended securities in this report. Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden. Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China. Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMBS. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBS. Corporate Governance Report: The disclosure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result. Score Range 90 100 80 89 70 79 Below 70 or No Survey Result Description Excellent Very Good Good N/A United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates. United Kingdom: This report is being distributed by CIMB Securities (UK) Limited only to, and is directed at selected persons on the basis that those persons are (a) persons falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the Order) who have professional experience in investments of this type or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order, (all such persons together being referred to as relevant persons). A high net worth entity includes a body corporate which has (or is a member of a group which has) a called-up share capital or net assets of not less than (a) if it has (or is a subsidiary of an undertaking which has) more than 20 members, 500,000, (b) otherwise, 5 million, the trustee of a high value trust or an unincorporated association or partnership with assets of no less than 5 million. Directors, officers and employees of such entities are also included provided their responsibilities regarding those entities involve engaging in investment activity. Persons who do not have professional experience relating to investments should not rely on this document. United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd solely to persons who qualify as "Major U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors and investment professionals whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not an Institutional Investor must not rely on this communication. However, the delivery of this research report to any person in the United States of America shall not be deemed a recommendation to effect any transactions in the securities discussed herein or an endorsement of any opinion expressed herein. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
Recommendation Framework #1 *
Stock
OUTPERFORM: The stock's total return is expected to exceed a benchmark's total return by 5% or more over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a benchmark's total return. UNDERPERFORM: The stock's total return is expected to be below a benchmark's total return by 5% or more over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a benchmark's total return by 5% or more over the next 3 months. TRADING SELL: The stock's total return is expected to be below a benchmark's total return by 5% or more over the next 3 months. relevant relevant relevant relevant relevant
Sector
OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 3 months.
* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand and Jakarta Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)
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Recommendation Framework #2 **
Stock
OUTPERFORM: Expected positive total returns of 15% or more over the next 12 months. NEUTRAL: Expected total returns of between -15% and +15% over the next 12 months. UNDERPERFORM: Expected negative total returns of 15% or more over the next 12 months. TRADING BUY: Expected positive total returns of 15% or more over the next 3 months. TRADING SELL: Expected negative total returns of 15% or more over the next 3 months.
Sector
OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +15% or better over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal number of stocks that are expected to have total returns of +15% (or better) or -15% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +15% to -15%; both over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -15% or worse over the next 12 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +15% or better over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -15% or worse over the next 3 months.
** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2011.
ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCP - Excellent, BEC - Very Good, BECL Very Good, BGH - not available, BH - Very Good, BIGC - Very Good, BTS - Very Good, CCET - Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, GLOBAL - not available, GLOW - Very Good, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, ITD - Good, IVL - Very Good, KBANK - Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT Excellent, PTTGC - not available, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Very Good, SPALI - Very Good, STA - Very Good, STEC - Very Good, TCAP - Very Good, THAI - Very Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good, TUF - Very Good:
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Asia-Pacific Locations:
CIMB Investment Bank Bhd (18417-M) (A Participating Organisation of Bursa Malaysia Securities Bhd) 10th Floor, Bangunan CIMB Jalan Semantan Damansara Heights 50490 Kuala Lumpur, Malaysia T: +60 (3) 2084 8888 F: +60 (3) 2084 8899 CIMB Securities (HK) Ltd (290697) Units 7706-08, Level 77 International Commerce Centre 1 Austin Road West Kowloon Hong Kong T: +852 2868-0380 F: +852 2537-1928 CIMB Private Limited Level 33, West Tower World Trade Center Echelon Square Colombo 01 CIMB Securities (S) Pte Ltd (198701621D) 50 Raffles Place #19-00 Singapore Land Tower ((S048623) Singapore T: +65 6225-1228 F: +65 6224-6906 PT CIMB Securities Indonesia (01.353.099.3-054.000) The Indonesia Stock Exchange Building Tower II, 20th Floor Jl. Jend. Sudirman, Kav. 52-53 Jakarta 12190 Indonesia T: +62 (21) 515-1330 F: +62 (21) 515-1335
CIMB Securities (Thailand) Co. Ltd. (0105542081800) 44 CIMB, Thai Bank Building 24-25th Floor, Soi Langsuan Lumpini, Patumwan, Bangkok 10330 Thailand T: +66 (2) 657-9000 F: +66 (2) 657-9111 CIMB Shanghai Rep Office Unit 802 AZIA Center 1233 Lujiazui Ring Road Pudong New District Shanghai 200120 China T: +862161940212 / +862161940218
CIMB in Association with SB Equities, Inc. Security Bank Centre, 18th Flr. 6776 Ayala Avenue, Makati City Philippines 0719
International Locations:
CIMB Securities (UK) Ltd (2719607) 27 Knightsbridge London, SW1X 7YB United Kingdom T: +44 (20) 7201-2199 F: +44 (20) 7201-2191
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Autos Malaysia

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Autos Malaysia

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June 26, 2012

June 26, 2012

June 26, 2012

MALAYSIA SINGAPORE INDONESIA THAILAND PHILIPPINES CHINA, HONG KONG

SHORT TERM (3 MTH)

Notes from the Field

More vrooom to grow

Loke Wei Wern

Figure 1: Malaysias vehicle sales

SOURCES: CIMB, MAA

One of the lowest cost of vehicle ownership

Demand fundamentals are intact

Tan Chong Motor

Pockets of export opportunities are present

June 26, 2012

KEY CHARTS Malaysias position in ASEAN

High vehicle penetration rate

700,000 600,000 500,000 400,000 300,000 200,000 100,000 -

Annual domestic vehicle sales (LHS)

Sizeable car-buying population

SOURCE: CIMB, 10MP, PRESS REPORT

June 26, 2012

Figure 2: Sector Comparisons

SOURCES: CIMB, COMPANY REPORTS

June 26, 2012

1. BACKGROUND 1.1 Where does Malaysia stand?

Notes from the Field

2. OVERVIEW OF MALAYSIAN AUTOS 2.1 Brief background on Malaysias auto sector

June 26, 2012

Figure 3: Manufacturing and assembly plants in Malaysia

Oriental Assemblers Sdn Bhd

Swedish Motor Assemblies Sdn Bhd

Tan Chong Motor Assemblies (Plant I)

Naza Automotive Manufacturing Sdn Bhd Scania (Malaysia) Sdn Bhd

SOURCES: CIMB, MAA

June 26, 2012

Figure 4: Auto players in Malaysia

SOURCES: CIMB, MAA

Figure 5: Total vehicles sales in Malaysia in 2011 (passenger and commercial)

SOURCES: CIMB, MAA

2.2 Second-largest passenger car market in ASEAN

Figure 6: Motor vehicle sales in ASEAN in 2011

SOURCES: CIMB, ASEAN AUTOMOTIVE FEDERATION

June 26, 2012

Figure 7: Passenger vehicle sales in 2011

Figure 8: Commercial vehicle sales in 2011

SOURCES: CIMB, ASEAN AUTOMOTIVE FEDERATION

SOURCES: CIMB, ASEAN AUTOMOTIVE FEDERATION

Figure 9: GDP per capita, current prices

Cambodia Malaysia Thailand

Indonesia Myanmar Vietnam

Lao People's Democratic Republic Philippines

SOURCES: CIMB, IMG

June 26, 2012

Figure 11: Malaysia - motorisation rate

Figure 12: Thailand - motorisation rate

Annual domestic vehicle sales (LHS)

Annual domestic vehicle sales (LHS)

SOURCES: CIMB, IMF, MAA

SOURCES: CIMB, IMF, AAF, JAMA

Figure 13: Indonesia - motorisation rate

Figure 14: Philippines - motorisation rate

Annual domestic vehicle sales (LHS)

Annual domestic vehicle sales (LHS)