SST holiday to end on 30 June
? The SST holiday for autos will end on 30 Jun but buyers who made bookings
up to that date can still benefit if they register their cars by 31 Mar 2023.
? This is positive for Malaysian autos and will provide healthy order visibility
over the next nine months. Retain Neutral, with Bermaz as top sector pick.
Sales and services tax (SST) holiday to end on 30 Jun 2022…
? The Ministry of Finance (MOF) announced yesterday that the sales and services tax
(SST) holiday for passenger car purchases in Malaysia w ill end as scheduled on 30 Jun 2022. The government introduced full SST exemption for locally-assembled passenger
cars and a 50% discount for fully-imported models on 15 Jun 2020. According to MOF,
868,422 units of new passenger cars have enjoyed the tax holiday so far, amounting to
total tax exemption of RM4.7bn.
… but benefits to be extended to 31 Mar 2023
? Nonetheless, in view of the delays in new car deliveries, the government is giving buyers
a grace period till 31 Mar 2023. Buyers w ho make bookings for a new vehicle up to 30
Jun have until 31 Mar 2023 to register their vehicles at the Road Transport Department
(JPJ) to enjoy the tax incentives.
? This is the government’s midpoint solution to balance the interest of consumers and the
country’s tax revenue, w hich needs to be increased post the pandemic. MOF said that
the domestic automotive industry still faced supply chain disruptions due to the global
semiconductor shortage. According to MOF, a total of 264,000 units of vehicles booked
during the SST holiday have yet to complete installation and delivery to customers.
Positive development for Malaysian auto sector
? We see the latest development as positive for Malaysia’s auto sector as it w ill provide
healthy demand visibility for the next nine months. How ever, w e see dow nside risk to
2023F total industry vehicle (TIV) numbers as a consequence. We keep our projection
of 580k TIV (+14% yoy) for 2022F, w hich is slightly low er than the Malaysian Automotive
Association’s (MAA) 2022F forecast of 600k (+18% yoy). Despite the potentially higher
TIV, w e still see earnings risks for the sector in view of 1) unfavourable forex, and 2)
inflationary pressures from rising raw materials and labour costs.
Retain Neutral rating on Malaysian autos
? We stay sector Neutral. The sector trades at 13.7x 2022F P/E, slightly below our target
sector P/E of 14x. We think the sector’s valuation reflects its mixed grow th prospects in
2022F. Bermaz is our sector top pick due to its attractive 5.6-6.2% FY22-23F dividend
yield, strong exposure to the grow ing sports utility vehicle (SUV) segment and
expanding market share w ith the addition of Kia and Peugeot marques to its stable.
? Key upside risks to our Neutral call are the strengthening of the ringgit vs. the US dollar
and Japanese yen, a reduction in interest rates, and favourable government policies to
revive domestic demand. The ringgit’s depreciation vs. the US dollar and Japanese yen,
interest rate hikes, a new w ave of Covid-19 infections, and extended delay in delivery
of orders due to the global semiconductor shortage are key dow nside risks to our call.