Affin: MBM 13 March 2008

A sustainable yield play
Expected to roll out by mid 2008
We understand that the Kembara replacement model would be launched in mid
2008. According to industry sources, the new Kembara will likely be based on the
new Daihatsu Bego/Toyota Rush model, which is powered by a 1.5 liter DVVT
engine. The existing Kembara model is using a 1.3 liter engine. There is no
indication yet on the potential pricing range but we think it will likely be above
RM60k compared to the current Kembara at RM53-58k since it comes with a
more powerful engine.

Will complement Perodua’s product line
Perodua’s bread and butter still lies in the production of small cars where 2 of its
current models, the Viva and MyVi account for 80% of its total sales volume. We
believe the Kembara (under the SUV segment) will only broaden its product line
but not a significant growth driver. We understand that the targeted monthly
sales volume is expected to be around 300 units per month only, compared to
Viva and MyVi, which are expected to exceed 5,000 units per month.
Nevertheless, given that Perodua has just launched its Viva last May to replace
its Kancil and Kelisa models, the debut of the Kembara replacement model is
inline with the company’s strategy of coming out with a new model every year.
Strategy – Maintaining market share above 30%
We forecast the TIV sales to grow by 6% to 515k units in 2008 from 487k units in
2007. However, we believe the increase will mainly be contributed by Proton –
sales growth projected at 17% to 136k units due to its low base (sluggish vehicle
sales in 2007) and additional new models in 2008. As for Perodua, we forecast a
marginal increase in sales volume by 3% from 161k units to 166k units, mainly
contributed by the full year contribution of the Viva and continuous strong
demand for its MyVi. Also, we forecast Perodua’s market share to maintain at
32% in 2008 versus 33% in 2007, thereby sustaining its market leadership
position.

Maintain BUY; Target price of RM4.84
We maintain Buy on MBM with a target price of RM4.84 based on a PER of 10x
FY08 earnings. We continue to like MBM for its exposure to Perodua, which is
the market leader in the passenger car segment with a market share to-date of
33%. We believe Perodua has strategically priced its models well in the highly
price sensitive national car segment. Moreover, its dividend yields are also
atractive at about 6.5%, which we believe is sustainable.