KUCHING: APM Automotive holdings Bhd (APM)’s strong financial year 2011 (FY11) result were led by resilient sales with a recorded figure of RM120 million despite the natural disasters in Japan and Thailand giving a hint of a bullish future for the company.
Based on a research report by HwangDBS Vickers Research Sdn Bhd (HwangDBS Vickers), APM managed to register year on year (y-o-y) sales growth despite the natural disasters in Japan and Thailand disrupting the auto supply chain last year.
Revenue was mainly driven by its original equiptment manufacturer (OEM) segment which the research firm believed saw milder negative impact because its OEM products were for the domestic market. Growth was also partially clipped by restricted raw material supplies and lower demand from auto makers last year.
It also noted that due to support by Perodua and Proton as its top customers, APM’s sales were dragged down by a smaller magnitude as local auto makers were less affected than foreign brands.
This was because of much higher local content in Perodua and Proton’s vehicles. The five top-selling brands in Malaysia were substantially affected after the natural disasters disrupted the supply chain.
Due to such results, HwangDBS Vickers added that it would be expecting better sales in FY12/FY13 with RM1.25 billion to RM1.33 billion revenue (between 5.5 per cent and 6.5 per cent y-o-y).
It forecasted RM124.7 million to RM136.6 million in net profit (between four per cent and 9.6 per cent y-o-y), especially from the OEM segment and exports, supported by total growth and higher gross margins from its integrated manufacturing facilities in Malaysia, and also better margins at its Indonesian and Vietnam plants.
It noted that APM would see positive synergies with local auto assemblers, especially with the increasing volume of locally assembled foreign brands (CKD units). DRB-Hicom was aiming for higher local parts content (30 per cent to 50 per cent), which could result in larger orders (and revenue) for APM.
APM would also ride on TIV growth – the Malaysian Automotive Association (MAA) forecasted 2012 TIV at 615,000 units (increase of 2.5 per cent y-o-y) versus in-house forecast of 608,000 units (increase of 1.3 per cent y-o-y).
The research firm mentioned that APM was poised to benefit from any of these developments. Its largest customer was still Perodua, which contributed about 45 per cent to 50 per cent of group sales in recent years. It contributed RM385.8 million in FY11, and it forecasted RM348.7 million for FY12F and RM379.6 million for FY13F. It also added that MAA was maintaining a bullish forecast of 615,000 unit sales for 2012.
The research firm pegged a target price of RM5.60 per share, based on nine times FY12F earnings per share of RM0.62 sen per share.