APM  reported  1H13  earnings  that  were  ahead  of  expectations,  from higher revenues and  lower minority  interest  costs. The  higher revenue was achieved despite pricing pressure from OEM customers. A special gross  dividend  of  MYR0.30  was  declared  ahead  of  the  expiry  of  its Section  108  tax  credits  at  end-2013.  We  revise  our  earnings  estimates higher and lift our TP to MYR5.50. Maintain NEUTRAL.

- Earnings  beat  expectations.  APM  reported  2Q13  earnings  that  beat both our and consensus estimates. 2Q13 net profit rose 56.3% q-o-q and 20.4%  y-o-y  to  MYR35.5m,  bringing  cumulative  1H13  earnings  to MYR63.7m  (+2.6%  y-o-y).  On  an  annualised  basis,  the  earnings exceeded our previous forecasts by 11.7% and consensus by 7.2%. The main  reason  for  the  deviation  was  the  higher-than-expected  revenue achieved  and  lower  minority  interest  costs.  A  MYR0.10  interim  gross DPS (in line) was declared together with a higher-than-expected special MYR.30 gross DPS bringing cumulative gross DPS to 40 sen (less tax). APM reported net cash of MYR329.9m at the end of the quarter.

- 1H13  revenue  up  12.2%  y-o-y.  APM’s revenue for the quarter under review of MYR338.3m (+18.6% q-o-q; 21.5% y-o-y) helped to grow 1H13 topline  by  12.2%  y-o-y  to  MYR623.6m.  This  was  a  surprise,  as  we  had expected  revenue  growth  to  be  somewhat  sluggish  due  to  pricing pressures  forced  on  the  industry  by  their  domestic  original  equipment manufacturer  (OEM)  customers.  Sales  of  interior  and  plastics  products rose  strongly  by  21.3%  y-o-y,  suggesting  volume  growth  from  new supply  contracts.  Cumulative  domestic  revenue  rose  13.9%  y-o-y, outstripping  total  industry  production  (TIP),  which  rose  just  5.3%  y-o-y. EBIT margins and effective tax rates were in line with our estimates.

- Key Risks. Lower car sales and unfavourable forex trends.

- Maintain NEUTRAL. After updating our revenue assumptions, we revise our  forecasts  for  FY13-14  up  by  10.9%  and  8.4%  to  MYR126.4m  and MYR133.9m  respectively.  We  also  revise  our  TP  upwards  to  MYR5.50 (from MYR5.35) after ascribing a lower target P/E of 8.0x (from 8.5x) to reflect a less favourable macroeconomic environment.

Source: RHB