PP 7767/09/2010(025354)

19 August 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
19 August 2010
APM Automotive
MARKET DATELINE

Share Price : RM4.91

Holdings Fair Value

Recom
:
:
RM5.53
Outperform
Strong Earnings Driven Mainly by Higher Margins (Maintained)

Table 1 : Investment Statistics (APM; Code: 5015) Bloomberg: APM MK

Net Net
Turnover profit EPS Growth PER# C.EPS* P/NTA EV/EBITDA Gearing ROE GDY
FYE
(RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (x) (%)
Dec
2009 918.5 72.7 36.0 42.0 13.6 - 1.5 6.6 Net Cash 11.3 2.3
2010F 1,077.1 94.7 47.0 30.4 10.5 50.5 1.3 4.3 Net Cash 12.7 2.6
2011F 1,153.5 101.3 50.3 7.0 9.8 55.8 1.3 3.5 Net Cash 12.9 2.6
2012F 1,316.8 115.3 57.2 13.8 8.6 64.5 1.2 2.2 Net Cash 13.6 2.6
Main Market Listing / Non-Trustee Stock / Non-Syariah Approved Stock By The SC * Consensus Based On IBES Estimates
RHBRI Vs. Consensus
♦ 1H10 earnings above our estimates but within consensus Above
forecasts. 6MFY10 core net profit of RM54.9m (ex one time price In Line
adjustment of RM7.6m) achieved 63.8% of our full year estimate of Below
RM86m and 54.4% of street’s full year estimate on the back of stronger
growth in the vehicle sales since the beginning of 2010. An interim Issued Capital (m shares) 201.6
dividend per share of 8 sen (less tax of 25%) was declared in the quarter, Market Cap (RMm) 989.9
above the 6 sen (less tax of 25%) interim dividend per share declared in
Daily Trading Vol (m shs) 0.5
FY09.
52wk Price Range (RM) 1.89-4.99
♦ Yoy up on better EBIT margins. Revenue was up 47.6% in 2QFY10, on Major Shareholders: (%)
the back of stronger vehicle sales growth (vs that of 2QFY09) from both Khasera Baru Sdn Bhd 41.4
the domestic (+46%) and the international fronts (60.3%). However, net Wealthmark Holdings 6.0
earnings were mainly driven by higher EBIT margins (+5.5ppts) recorded
in the quarter, which was caused by costs savings from the higher volume FYE Dec FY10 FY11 FY12
and hence economies of scale. EPS chg (%) 10.1 6.2 4.2
♦ Qoq performance sustained. On a qoq basis, revenue grew 10.2% in Var to Cons (%) (7.0) (9.9) (11.3)
2QFY10, underpinned by better earnings on the local front (+14.2), but
again it was the accretion in EBIT margins (+4.2ppts) that led to overall PE Band Chart
expansion in qoq net earnings.
♦ Outlook. APM’s growth should moderate in 2HFY10 in line with the PER = 11x
general trend of its customers. However, we are still very positive on its PER = 8x
PER = 5x
full year earnings, given the swift recovery of the auto sector since the
beginning of 2010. Going into FY11, growth prospects will be underpinned
by a) Tan Chong’s entry into the small car segment and the Indochina
market; and b) consolidation of their Seri Kembangan facilities to Port
Klang that would improve its operating efficiency.
♦ Key risk. 1) Lower auto sales arising from economic slowdown which will
Relative Performance To FBM KLCI
affect demand from auto makers; 2) Weakening of RM against US$ and
Yen that will result in higher cost of sales; 3) Steep rise in raw material
prices that will result in margin squeeze; and 4) Exposure in foreign APM Automotive
countries.
♦ Forecasts. Given the better-than-expected earnings thus far, we raise
our revenue estimates for FY10-12 by 9 %, 5.3% and 5.2% respectively
and increase our EBIT margins marginally, to account for the lower costs FBM KLCI
on the back of economies of scale. This translates to a 10.1%, 6.2% and
4.2% increases to our FY10-12 earnings numbers. We highlight our
earnings estimates are still lower than consensus numbers by 7%, 9.9%
and 11.3% respectively.
Joshua CY Ng
♦ Investment case. With our upgrade in FY10-12 earnings, our indicative (603) 9280 2239
fair value is thus raised to RM5.53 (from RM5.21) based on unchanged joshuang@rhb.com.my
11x FY12/11 EPS. We reiterate our Outperform recommendation on the
stock.
Please read important disclosures at the end of this report.

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 19 August 2010

Table 2: Earnings Review

IMPORTANT DISCLOSURES
FYE Dec 2Q09 1Q10 2Q10 qoq Yoy 6M09 6M10 yoy Comments
This report has been prepared by RHB Research Institute
(RMm) (%)Sdn Bhd (RHBRI)
(%) and is for private circulation only
(%) to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
Revenue Higher qoq and yoy due to strong growth
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
213.0
be contrary to opinions 285.1
expressed by other 314.3 10.2
business units 47.6Group403.7
within the RHB as a result599.4 in customers’
48.5assumptions
of using different vehicle
and criteria. sales.
This report is not to be
EBITconstrued as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant EBITthe accuracy
marginsof improved
anything stated
qoq herein
and yoy in any
due
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
to lower costs resulting from higher
may from time to time have an interest in the securities mentioned by this report.
volume and economies of scale.
24.1 36.0 52.7 46.5 119.0 38.2 88.7 132.2
This report
Interest exp does not(0.2) provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The (0.1) (0.1) in this
securities discussed (9.2)
report may(26.3) (0.4)for all investors.
not be suitable (0.2) (39.8)
RHBRI recommends that investors independently evaluate
Interest inc
particular investments1.3 and strategies, 1.5
1.3 and encourages 20.1
investors 17.3the advice
to seek 2.5of a financial
2.8 adviser.
15.5
The appropriateness of a particular investment or
EI strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor anyOne-off
of its affiliates, employees orofagents
price adjustment accepts
RM7.6m.
any liability for any loss or damage arising out of the use of all or any part of this report.
0.0 0.0 7.6 >100 >100 0.0 7.6 >100
RHBRI
Pretax and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
profit
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time 25.2hold positions,
37.1 54.1
and may trade 45.8
or otherwise114.6 40.2
effect transactions, for91.3 126.9 or the accounts of customers, in debt or equity
its own account
securities or loans of any company that may be involved in this transaction.
Taxation (4.8) (8.2) (13.2) 61.3 176.0 (8.1) (21.3) 162.7
MI “Connected Persons” means
2.9 any holding
3.0 (4.4) of RHBRI,
company (246.0)the subsidiaries
(253.6) and subsidiary
4.3 (1.4) (132.5)
undertaking of such a holding company and the respective directors,
Net officers,
profit employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will
Filtered seekfrom
down investment
PBT banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.
17.6 25.9 36.5 40.9 108.0 27.8 62.5 124.5
This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
Net information
profit ex-known to, professionals in other business areas of the “Connected Persons,” including investment banking
Net profit excluding one-off price
personnel.
EI 17.6 25.9 28.9 11.6 64.7 27.8 54.9 97.2 adjustment from revenue and PBT.

Margins (%): ppts ppts ppts

EBIT 11.3 12.6 16.8 4.2 5.5 9.5 14.8 5.3
Pretax 11.8 13.0 17.2 4.2 5.4 10.0 15.2 5.3
Net profit 8.2 9.1 11.6 2.5 3.4 6.9 10.4 3.5
Net profit ex-EI 8.2 9.1 9.4 0.3 1.2 6.9 9.3 2.4
Eff. Tax Rate (18.9) (22.0) (24.3) (2.3) (5.4) (20.2) (23.4) (3.2)
Source: Company data, RHBRI estimates

Table 3. Earnings Forecast

FYE Dec (RMm) FY09a FY10F FY11F FY12F

Turnover 918.5 1,077.1 1,153.5 1,316.8

Turnover growth (%) (2.7) 17.3 7.1 14.2

EBITDA 127.0 168.4 179.7 202.3

EBITDA margin (%) 13.8 15.6 15.6 15.4

Depreciation 29.9 29.4 30.9 32.4

Amortisation 0.5 0.6 0.6 0.6
EBIT 96.6 138.4 148.2 169.2
EBIT margin (%) 10.5 12.9 12.9 12.9

Net Interest 4.1 5.1 5.3 5.5

Associates 0.0 0.0 0.0 0.0

Pretax Profit 100.6 143.5 153.5 174.7

Pretax margin (%) 10.9 13.3 13.3 13.3
Tax (18.4) (37.3) (39.9) (45.4)
PAT 72.7 106.2 113.6 129.3
Minorities 9.6 11.5 12.3 14.0
Net Profit 72.7 94.7 101.3 115.3
Net Profit margin (%) 7.9 8.8 8.8 8.8

Source: Company data, RHBRI estimates

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 2 of 3
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 19 August 2010

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 3 of 3
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