• Perodua has opened bookings for its new SUV, the Perodua Aruz. Key details on the model:

1) The 3-row, 7-seater Aruz is available in two variants: the 1.5X (RM72.2K) and 1.5AV (RM77.2K). Standard features include LED head lamps, keyless entry and push start button, a reverse camera and 6 airbags. The higher variant has an advanced safety assist (ASA) that builds on the existing features (autonomous emergency braking, front departure alert) with pedestrian detection, along with a built-in driving video recorder and leather covers for the seats and wheel.

2) The Aruz is powered by the same engine in the Myvi and is based on the Toyota Rush. Its direct comparables are the 1.5L Honda BR-V (RM81K–88K) and 1.5L Toyota Rush (RM93K–98K).

3) Perodua expects to sell an average of 2.5K units/month or 31.2K units by year-end.

• Our comments:

1) The announcement of the Aruz this week is an opportunistic move by Perodua and matches the expectation of an end-Jan/early-Feb launch. Perodua will be able to capitalize on the Chinese New Year period and potentially divert some attention from other SUVs including the Proton X70. However, we note that the 1.8L X70 occupies a different segment and is priced higher (RM99.8K–123.8K).

2) The Aruz continues Perodua’s emphasis on affordability and value. It will be the cheapest option in its segment and is bolstered by an EEV rating based on a fuel consumption of 15.6km/litre. We note that the Aruz is Perodua’s best attempt at streamlining a model. It is only available on 2 variants (vs. 4–6 variants on Perodua’s existing models), on a single engine size and transmission type (auto). We believe this will serve to pivot sales towards the higher variant, which costs RM5K or 7% more.

3) We believe the sales target for the Aruz is ambitious but not impossible. Sales of 2.5K/month would reap ~42% of the current average of 5.9K/month in total SUV sales, and is above the average of 1.9K/month seen by the current market leader in the segment, Honda. The Aruz is supported by the timing of its entry and market position as the cheapest option in a far less saturated segment of the SUV market. We project average sales of 2.1K/month for the Aruz and believe the model could cannibalize on the sales of the Alza to a minor extent. The Alza is a 7-seater MPV with a captive market of ~2K/month, although it is offered at a lower price range of RM52K-RM63K.

• We retain our projection of a 3% volume growth to 233K units for Perodua in 2019, with the Aruz accounting for ~11% of total sales. Volume would still be anchored to the Myvi and Axia, while the Aruz will serve to boost margins. Perodua looks to close a bumper year in 2018 during which it rode on the new Myvi and took efforts to fully capitalize on the tax holiday. We reiterate the key beneficiaries to Perodua to be MBM Resources (BUY, FV: RM3.42) and Pecca Group (BUY, FV: RM1.05).

Source: AmInvest Research - 4 Jan 2019