KUALA LUMPUR: CIMB Equities Research is maintaining its Underweight call on the sector due to persistent weakness in consumer sentiment and potential margin erosion from higher operating expenditure (opex) and intense competition.It said on Monday the sector trades at 0.7 times CY18 price-to-book value (P/BV), slightly above its historical mean of 0.6 times. Hence, there are still downside risks if sector earnings continue to disappoint in 2017.Key upside risk to its call are better-than-expected recovery in total industry volume (TIV) sales and strengthening of ringgit.CIMB Research said total industry volume (TIV) for January-November 2016 fell 12.5% on-year to 515,000 units due to weaker consumer sentiment and tightening credit from financial institutions.The total hire purchase loans approval lost 3.5 percentage points on-year to 52.9% while the total loans applied amount also dropped 9.4% or RM7.7bil in 2016. The lower TIV was also attributable to higher car prices as several auto companies raised their prices in 2016.As a result of lower sales volume, sector revenue fell 13.8% in 2016. the CX-5 and CX-9 models this year and expansion into the Philippines market.“The stock trades at 10 times CY18 P/E, which is more than 1 standard deviation below its historical mean of 14 times. Moreover, the stock offers an attractive CY17-18F yield of 7.0% and 7.1%, the highest in the sector,” it said.

Source: The Star January 16, 2017 00:51 UTC