KUALA LUMPUR (July 6): Kenanga Research has maintained an “overweight” call on the automotive sector and said new cars represent an affordable luxury for most Malaysian households despite the high inflation and a slowing global economy.

In a sector update on Thursday (July 6), the research house maintained its CY2023F total industry volume (TIV) of 720,000, which will match the record level achieved in CY2022, underpinned by: (i) strong consumer confidence supported by a stable economy and a healthy job market, (ii) the affordability of motor vehicles, underpinned by stable new car prices thanks to the deferment of new excise duty regulations (that could have resulted in prices of locally assembled vehicles increasing by 8%-20%) and potentially cheaper hire purchase cost, with the introduction of reducing balance method in the calculation of interest charges, and (iii) attractive new models.

Kenanga said earnings visibility of the industry is strong, backed by a booking backlog of 275,000 units as at end-May 2023.

“Our sector top picks are MBM Resources Bhd (OP; TP: RM4.70) and Bermaz Auto Bhd (OP; TP: RM3.10), both with an attractive dividend yield of more than 7%,” it said.