• APM Automotive (APM) returned to the black in 3Q20 (vs 2Q20 core net loss of RM20m), thanks to the resumption of business operations.
• Despite the better 3Q results, APM’s 9M20 core net loss of RM9m was below our expectations.
• We cease coverage on APM due to our resource reallocation and its low share liquidity.

3Q20 returned to the black

Sequentially, APM’s 3Q20 core net profit recovered to RM14m (from a 2Q20 core net loss of RM20m) due to the resumption of business operations after the temporary plant closures during the Movement Control Order period in 2Q20.

9M20 core net loss of RM9m below expectations

Despite the better 3Q20 results, APM reported a 9M20 core net loss of RM9m (vs. 9M19 core net profit of RM23m) on the back of dismal 6M20 results owing to the lockdown measures. Overall, the results were below our expectations due to the lower-thanexpected EBITDA margin. We believe the Group should see subsequent improvement in the coming months, considering the higher demand for auto part components given the sales & service tax exemption for Completely Knocked Down cars in Malaysia.

Cease coverage

We cease coverage on APM due our resource reallocation and its low share liquidity. Our last call on the stock was a Hold with a target price of RM1.50, based on 17x 2021E PER (-1SD its 6-year mean forward PER).

Source: Affin Hwang Research - 20 Nov 2020