KUALA LUMPUR (Jan 16): UMW Holdings Bhd and MBM Resources Bhd gained as much as 1.59% and 4.5% respectively in early trades on news of Perusahaan Otomobil Kedua Sdn Bhd’s (Perodua) record car sales in 2012.
At 11am today, UMW shares jumped 10 sen or 0.8% to RM12.64 on volumes of 788,500 shares. Shares in MBM rose 10 sen or 3% to RM3.43, with 801,900 shares traded.
Since the start of the year, automotive counters like UMW, MBM and Tan Chong Motor Holdings Bhd have been climbing, making gains as much as 6.5%, 7.8% and 12.2% respectively during the period.
Perodua, in which UMW and MBM hold stakes of 38% and 23.6% respectively, announced yesterday that it had sold 189,000 vehicles in 2012, exceeding its 188,000 target.
The second national carmaker has also set a target of 194,000 in sales for 2013, which may allow it to maintain market leadership with a 30.9% market share.
Perodua also unveiled a capital expenditure allocation of RM2.32 billion over the next four years to expand and upgrade manufacturing and sales capacities to be competitive.
This sum includes prior plans to spend RM790 million on its second manufacturing plant in Rawang which will have capacity of 200,000 units on double shift.
“This plant will give Perodua a total production capacity of 300,000 units per annum to meet growing demand both domestically and overseas,” said Maybank IB Research’s Wong Chew Hann and Ivan Yap in a note this morning.
However, Wong and Yap noted that as Perodua’s aggressive plan is to be funded internally, dividend payments may be compromised.
Affin Investment Bank’s Chong Lee Len is positive on Perodua’s position when the sector is liberalised.
“Conceptually, as the automotive sector gradually liberalises, competition is expected to favour nimble autoplayers such as Perodua who is currently gearing up to cope with future competition,” she said in a note this morning.
Investors may also be buying into UMW and MBM now that the Japanese Yen value has fallen under the new administration’s policy to boost Japanese exports and lift its economy.
Additionally, the Malaysian Ringgit is also strengthening, gaining 0.5% to 3.02 to a US dollar this morning.
A stronger ringgit and weaker yen will help importers of Japanese auto parts.
Affin has “add” calls on both UMW and MBM with target prices of RM12.40 and RM3.45 respectively.
Maybank however has downgraded UMW to a “hold” with an unchanged target price of RM12.00, citing uncompelling risk-to-reward ratio.
But Maybank has a “buy” call on MBM with a target price of RM4.05, as it views the stock as the cheapest automotive stock on the market and has a good earnings outlook.
MIDF Research has “buy” calls on both UMW and MBM with target prices of RM13.20 and RM5.20 respectively.
The research house also has “buy” calls on other automotive stocks APM Automotive Holdings Bhd and Tan Chong with target prices of RM6.50 and RM6.30 respectively.