April 18, 2012

Automotive Sector - March's vehicle sales down 15% y-o-y

Stock Name: APM
Company Name: APM AUTOMOTIVE HOLDINGS BHD
Research House: HWANGDBSPrice Call: BUYTarget Price: 5.60

Stock Name: MBMR
Company Name: MBM RESOURCES BHD
Research House: HWANGDBSPrice Call: BUYTarget Price: 6.10



Automotive Sector - March's vehicle sales down 15% y-o-y
According to the Malaysian Automotive Association (MAA), March 2012's motor vehicles sales was recorded at 53,583 units (-15.3% y-o-y from March 2011's 63,264 units). On a month-to-month basis, March's sales came in higher compared with the previous two months (January: 40,948 units and February: 44,013 units), which is within our expectations as sales picked up after the holiday season in January and February.

This brings total sales volume for 1Q12 to 138,544 units (-12.6% y-o-y from 1Q11's 158,432 units). We maintain our 2012 TIV forecast of 606,507 units (+1.1% y-o-y). Our top sector picks are MBM Resources
(Buy; TP RM6.10) and APM Automotive (Buy; TP RM5.60).
APM Automotive; Buy; RM4.68
Price Target: RM5.60; APM MK

Setting foot in IndonesiaAPM has announced to Bursa yesterday that it has received government approval from Indonesia for the establishment of 100%-owned PT APM Auto Components Indonesia (PT APMACI) with a paid-up and issued share capital of US$8m. To be located on an industrial lot with land area measuring approximately 38,077 sq meters at Suryacipta Industrial City in Karawang, West Java, the new subsidiary will manufacture and sell automotive heat exchange products, namely, air-conditioning cooling system, evaporators, condensers, cooling modules and radiators for the Indonesian market.

Total investment outlay for the project is estimated at approximately US$10.9m (RM33.5m), to be financed by internal funds with the facility due for completion by end-2012 and operations commencing by 2Q13. APM's venture into the Indonesian market is in-line with our expectations under the group's long-term strategic growth plan. However, given the stated timeline, meaningful contributions from Indonesia is expected to be felt only after FY13. We are maintaining our revenue forecasts for the Group at RM1.25bn (+5.5% y-o-y) in FY12 and RM1.33bn (+6.5% y-o-y) in FY13, with APM's operations outside Malaysia contributing RM125m (+11.0% y-o-y) this year and RM130m (+15.0% y-o-y) next year.

Maintain Buy at RM5.60 TP pegged to 9x FY12F EPS of 62 sen.

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