Wednesday, October 12, 2011

OSK Research maintains Neutral on auto sector

KUALA LUMPUR: OSK Research is maintaining its Neutral stance on the auto sector as sentiment on big ticket purchases in the upcoming months will remain weak.

It said on Wednesday, Oct 12 that adding to the current woes is the strengthening US dollar vs the ringgit, which will put a dent on earnings.

'UMW, Proton and Tan Chong remain Sells, with FVs of RM6.29, RM2.00 and RM4.27 respectively, with our Buys confined to auto parts makers such as EPMB and Delloyd Ventures, whose FVs are RM1.38 and RM3.88 respectively,' it said.

OSK Research said Thailand's auto exporters are being hit by supply chain disruptions following the worst floods in the country in nearly half a century.

Quoting a news report, it said Thailand is a major production and export hub for global auto makers like Toyota Motor Co, Ford Motor Co and Honda Motor Co. All three have shut their Thai plants after severe floods swept a cluster of component plants in Ayutthaya, 67 km north of Bangkok. On Tuesday, Isuzu Motors Ltd also halted production at its two Thai plants due to supply disruption.

As for Malaysia, OSK Research said it expects automakers in Malaysia - which rely heavily on completely-knocked-down (CKD) imports from Thailand (notably for UMW and DRB-Hicom) - to be impacted by the supply chain disruptions although we see the impact largely as being mild.

'Our channel checks indicate that the inventory of local auto players is at comfortable levels of at least a month. Assuming a one-month backlog, in a worst-case scenario, this would only affect total TIV volume of the Japanese marques for a month, at an estimated total of 15,000 vehicles. This will subsequently be made up for in the subsequent months, provided that the rainy season does not prolong,' it said.

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