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Malaysia: Car sales expected to rise on improved economy
Although most auto-related companies on a year-on-year basis performed better during the fourth quarter of 2009, except for UMW Holdings Bhd, analysts said not all exceeded expectations.
“Underlying trends in the sector have improved. Results of auto stocks under our coverage were largely in line,” said AmResearch analyst Hafriz Hezry.
“Those that significantly outperformed consensus were Proton (Holdings Bhd) and APM (Automotive Holdings Bhd). Though most auto manufacturers showed a quarter-on-quarter dip, this is in line with seasonality.”
Companies such as Proton and MBM Resources Bhd, which has a large stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua), managed to post higher earnings in the fourth quarter compared with the same period a year ago.
Tan Chong Motor Holdings Bhd too reported better earnings in the fourth quarter as it gained from a stronger ringgit and better sales.
“Things will look up from the first quarter onwards,” said OSK Research analyst Ahmad Maghfur Usman.
Hafriz expects earnings growth of 43 percent to 52 percent for the current financial year for the auto stocks it covers.
In terms of biggest surprises, Hafriz said that would be the increase in profit margins.
“The market may have underestimated benefits from economies of scale derived from better plant utilisation and lower discounting activities,” he said.
For the more diversified auto groups such as UMW and DRB-HICOM Bhd, their results headed at opposite direction.
For UMW, its auto businesses during the quarter held up as higher sales of cars and auto parts were recorded by the company in that segment. The company noted that Toyota and Perodua cars commanded a 45.5 percent share of the Malaysian market in 2009.
But the company posted lower profits during the quarter as it was dragged by some of the group’s other operating segments.
For DRB-HICOM, net profit during the quarter more than doubled from a year ago as the company saw higher contributions from its services segment. The diversified group announced a 125 percent rise in profit to 103.5 million ringgit during the quarter, which was the company’s third quarter of its fiscal year.