Bursa Malaysia Stock Watch
EP Manufacturing
kltrader
Publish date: Tue, 05 Jan 2010, 10:44 PM
kltrader
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EP Manufacturing: "Target RM0.59
Previous RM0.52
Price RM0.43
During our recent visit to EPMB, management further clarified that the new localization programmes for the Myvi and Alza which the company recently secured would substantially broaden its revenue base come 2010. With the new guidance and a slight tweak in our model, we have raised our revenue and net profit estimates by
11% and 42% respectively for FY10. We see EPMB potentially exhibiting strong bottom-line numbers, for which we expect a growth of 87.2% for FY10 on better financial leverage and the economies of scale achieved in its production line. Following the upward earnings revision, our TP is increased to RM0.59 from RM0.52 with our BUY call reaffirmed.
Counting on Perodua. We recently visited EP Manufacturing. As we stated in our last report, EP Manufacturing had recently secured a new contract from Perodua for the manufacture of the cross member structure (a structure that holds the engine) for both the Myvi and Alza after investing over RM40m-60m in dies, moulds and R&D. Previously EPMB had only secured Perodua’s localization programme for the Viva’s cross member, from which it collects an estimated RM700-800 per car, along with the other parts it supplies. The further localization of the Myvi and Alza would see EPMB increasing the supply of auto-parts to both models from 33 parts to 103 parts in total, almost tripling its revenue collected per Myvi from 2010 onwards.
Doubling revenue from Perodua. Given the new assumptions that we had not earlier gauged, we are substantially increasing our revenue contribution from Perodua. We estimate that revenue contribution from Perodua would increase from RM74m (as collected in FY08) to as much as RM196m in FY10 on the back of the higher average revenue per Perodua vehicle supplied (from RM477 in FY09 to RM1115 per vehicle). The growing revenue from Perodua will increase its proportionate share of EPMB’s total revenue from
15%-17% in FY08-09 to over 35% from FY10 onwards.
Upbeat on the Alza. We perceive that EPMB’s management is optimistic on Perodua’s recently launched Alza, for which management said the demand has been encouraging as the booking period is stretched as far as 4 months. While there have been concerns over the potential cannibalization on Myvi sales, we think the impact will not be severe as vehicle sales for the Myvi have remained uninterrupted to date despite the recent launch of the Alza. Perodua anticipates that bookings could average well above 4000 units per month for FY10, beating Exora’s monthly average sales to date since its launch earlier this year.
52 week HL Price (RM) 0.60 0.12
Major Shareholders (%)
Mutual Concept 37.21
DBS Asset Management 7.01
Abdullah Bin Hamid 5.09
By OSK188
Analyst: Ahmad Maghfur Usman
"
Previous RM0.52
Price RM0.43
During our recent visit to EPMB, management further clarified that the new localization programmes for the Myvi and Alza which the company recently secured would substantially broaden its revenue base come 2010. With the new guidance and a slight tweak in our model, we have raised our revenue and net profit estimates by
11% and 42% respectively for FY10. We see EPMB potentially exhibiting strong bottom-line numbers, for which we expect a growth of 87.2% for FY10 on better financial leverage and the economies of scale achieved in its production line. Following the upward earnings revision, our TP is increased to RM0.59 from RM0.52 with our BUY call reaffirmed.
Counting on Perodua. We recently visited EP Manufacturing. As we stated in our last report, EP Manufacturing had recently secured a new contract from Perodua for the manufacture of the cross member structure (a structure that holds the engine) for both the Myvi and Alza after investing over RM40m-60m in dies, moulds and R&D. Previously EPMB had only secured Perodua’s localization programme for the Viva’s cross member, from which it collects an estimated RM700-800 per car, along with the other parts it supplies. The further localization of the Myvi and Alza would see EPMB increasing the supply of auto-parts to both models from 33 parts to 103 parts in total, almost tripling its revenue collected per Myvi from 2010 onwards.
Doubling revenue from Perodua. Given the new assumptions that we had not earlier gauged, we are substantially increasing our revenue contribution from Perodua. We estimate that revenue contribution from Perodua would increase from RM74m (as collected in FY08) to as much as RM196m in FY10 on the back of the higher average revenue per Perodua vehicle supplied (from RM477 in FY09 to RM1115 per vehicle). The growing revenue from Perodua will increase its proportionate share of EPMB’s total revenue from
15%-17% in FY08-09 to over 35% from FY10 onwards.
Upbeat on the Alza. We perceive that EPMB’s management is optimistic on Perodua’s recently launched Alza, for which management said the demand has been encouraging as the booking period is stretched as far as 4 months. While there have been concerns over the potential cannibalization on Myvi sales, we think the impact will not be severe as vehicle sales for the Myvi have remained uninterrupted to date despite the recent launch of the Alza. Perodua anticipates that bookings could average well above 4000 units per month for FY10, beating Exora’s monthly average sales to date since its launch earlier this year.
52 week HL Price (RM) 0.60 0.12
Major Shareholders (%)
Mutual Concept 37.21
DBS Asset Management 7.01
Abdullah Bin Hamid 5.09
By OSK188
Analyst: Ahmad Maghfur Usman
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