Highlights

• Manufacturing sales will continue to drive revenue growth, supported by strong demand from local auto manufacturers like Perodua and Proton, as well as other key customers like Honda and Toyota. Some slowdown is expected in China as the coronavirus keeps factories closed although the impact to HIL’s bottomline is expected to be minor for now. Meanwhile, progress billings from the property division are expected to remain steady amid healthy take-ups of HIL’s development projects.

• Moving forward, we foresee improved bottomline margins, buoyed by stronger revenue and better production efficiency. We expect HIL’s 2019 – 2020 earnings to expand at a double-digit growth rate, while five-year CAGR is estimated to grow at a high single-digit of 8.4% to RM25.8 mln in 2020. Balance sheet also remains robust as the group maintains its net cash position, ensuring sufficient funds for working capital and potential expansion plans.

• We maintain our HOLD recommendation on HIL Industries Bhd with an unchanged target price of RM0.75 as we maintain a cautious stance to this stock owing to the unabated depression in the property market that will limit any stock price uptrend potential over the near-to-medium term.

Source: Mplus Research - 17 Feb 2020