Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD
Research House: AMMB
Auto Parts Sector
Maintain overweight: Our latest channel checks suggest that Ingress Corp Bhd's (not rated) Proton parts supply contract announced on Oct 12 is for the Persona replacement model and not for the Perdana. Checks with Proton confirm that it is launching the Persona replacement model in 2012.
To recap, Ingress announced it had secured a RM57 million contract to supply parts for a 'new Proton model'. The five-year contract ' typically lasting through the life-cycle of the model ' entails the supply of roof drip mouldings and door sashes. Supply of parts is expected to start in 4QCY11.
As we had indicated earlier, we believe this piece of news would have a positive bearing on APM Automotive Holdings Bhd (buy, fair value: RM6.80/share) as a Tier-1 supplier to Proton.
Proton's existing Persona model is one of its main volume contributors ' accounting for 28% of its total industry volume this year. During its early years, 2008 and 2009, the model generated a sales volume of more than 3,500 units per month.
Our projections have not factored in the contributions of this model to APM, but Proton is notably APM's second largest customer accounting for 16% of revenue in FY09. On a revenue per model basis, Proton contributes an average RM888 in top line to APM for every model it produces. At this rate, and based on the Persona's historical volume, we estimate that it could contribute up to RM37 million in revenue per year to APM.
Supply contracts for the Persona replacement aside, valuations of auto part players have lagged significantly to those of auto manufacturers during the sector run-up over the past 12 months. APM's discount to auto manufacturers has widened to 35% from a historical average of 29%. News flow on model introductions in the local market should provide the next catalyst for the auto parts sector.
We reiterate a buy on APM with fair value unchanged at RM6.80. Our valuation continues to peg APM at an ex-cash FY11F PER of seven times. APM currently trades at an undemanding six times FY11 earnings, the cheapest in our universe of auto stocks. Ex-net cash of RM313 million, APM trades at just four times FY11F EPS of 76 sen/share. More importantly, APM is close to breaking out of its small-cap status (less than RM1 billion market cap) which should give it much better visibility among institutional investors. ' AmResearch Sdn Bhd, Oct 13
This article appeared in The Edge Financial Daily, October 14, 2010.
Company Name: APM AUTOMOTIVE HOLDINGS BHD
Research House: AMMB
Auto Parts Sector
Maintain overweight: Our latest channel checks suggest that Ingress Corp Bhd's (not rated) Proton parts supply contract announced on Oct 12 is for the Persona replacement model and not for the Perdana. Checks with Proton confirm that it is launching the Persona replacement model in 2012.
To recap, Ingress announced it had secured a RM57 million contract to supply parts for a 'new Proton model'. The five-year contract ' typically lasting through the life-cycle of the model ' entails the supply of roof drip mouldings and door sashes. Supply of parts is expected to start in 4QCY11.
As we had indicated earlier, we believe this piece of news would have a positive bearing on APM Automotive Holdings Bhd (buy, fair value: RM6.80/share) as a Tier-1 supplier to Proton.
Proton's existing Persona model is one of its main volume contributors ' accounting for 28% of its total industry volume this year. During its early years, 2008 and 2009, the model generated a sales volume of more than 3,500 units per month.
Our projections have not factored in the contributions of this model to APM, but Proton is notably APM's second largest customer accounting for 16% of revenue in FY09. On a revenue per model basis, Proton contributes an average RM888 in top line to APM for every model it produces. At this rate, and based on the Persona's historical volume, we estimate that it could contribute up to RM37 million in revenue per year to APM.
Supply contracts for the Persona replacement aside, valuations of auto part players have lagged significantly to those of auto manufacturers during the sector run-up over the past 12 months. APM's discount to auto manufacturers has widened to 35% from a historical average of 29%. News flow on model introductions in the local market should provide the next catalyst for the auto parts sector.
We reiterate a buy on APM with fair value unchanged at RM6.80. Our valuation continues to peg APM at an ex-cash FY11F PER of seven times. APM currently trades at an undemanding six times FY11 earnings, the cheapest in our universe of auto stocks. Ex-net cash of RM313 million, APM trades at just four times FY11F EPS of 76 sen/share. More importantly, APM is close to breaking out of its small-cap status (less than RM1 billion market cap) which should give it much better visibility among institutional investors. ' AmResearch Sdn Bhd, Oct 13
This article appeared in The Edge Financial Daily, October 14, 2010.
No comments:
Post a Comment