Wednesday, July 7, 2010

AmResearch affirms 'buy' on APM

KUALA LUMPUR: AmResearch has affirmed its "buy" on APM Automotive Holdings (APM) and maintain its fair value of RM5.40 a share.

It said on Wednesday, July 7 that Nissan Motor Indonesia has announced plans to invest over US$20mil to expand its existing plant in Indonesia.

APM is a key beneficiary of Nissan Motor Indonesia's aggressive expansion plans given its status as a Tier-1 supplier to Nissan Motor Indonesia's via its 50% stake in the JCI-Armada-APM consortium.

Nissan Motors' expansion plan in Indonesia comes hot on the heels of its plans to establish a strategic presence in Vietnam commencing with its first locally assembled model, the Grand Livina. Earnings revision cycle for APM remains strongly intact.

APM's strong net cash position of RM278mil (RM1.38/share) suggests potential special dividends considering available tax credits amounting to RM89mil, which will expire over the next three years.

APM's leverage to the auto sector and solid balance sheet positions it as an inexpensive yet quality alternative exposure to a solid recovery in the auto sector, Ex-cash, APM trades at just 4x FY10F EPS - at 67% and 56% discount to UMW (12x FY10F EPS) and Tan Chong (10x FY10F EPS).


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