We  note  that  company  insiders  have  been  aggressively  buying  APM shares  on  the  open  market  since  September,  which  we  believe  raises the  probability  of  another  special  dividend.  We  highlight  the  risk  of  a mild  de-rating  post  dividend.  Our  MYR5.50  FV  implies  a  reasonable yield of 4% that is sustainable,  although EPS growth  will be pedestrian going forward. Prefer Tan Chong. Maintain NEUTRAL on APM.

- Expect  steady  organic  growth.  While  management  admitted  to considering  M&A  opportunities  to  grow  the  business,  it  was  not aggressively  looking  for  deals.  In  line  with  APM’s  conservative management culture, we think growth will likely  continue to be organic. Contract  supply  opportunities  will  continue  to  come  from  APM’s  close relationship with Tan Chong  Motor (TCM MK, BUY, FV: MYR6.80).  Tan Chong’s  move  into  the  contract  assembly  business  will  also  mean component supply opportunities for APM. Other industry trends that will benefit  APM  include  increasing  efforts  by  domestic  manufacturers  to increase  localisation  (to  achieve  lower  effective  excise  duty  rates)  and attempts to increase automotive exports to regional markets.

- Push for greater efficiency.  APM continues to seek efficiency gains to boost  productivity  and  counter  price  reduction  initiatives  by  its customers.  These  include  more  efficient  sourcing,  greater  automation and a closer working relationship with OEM customers from the supply of pre-assembled  modules  that  enable  APM  to  generate  higher  margins than from the supply of loose components.

- Last  chance  to  utilise  S.108  tax  credits.  With  S.108  tax  credits expiring at end-2013, the September quarter results will likely be the last opportunity  to  declare  and  pay  dividends  to  utilise  the  credits.  The remaining  tax credits of about MYR30m is sufficient to declare a special dividend of up to 60 sen per share.

- Key risks. These include lower car sales and unfavourable forex trends.

- Still  NEUTRAL.  We retain our NEUTRAL call on APM and fair value  of MYR5.50, which  is  derived from ascribing a target P/E of 8x,  in line with the three-year historical average.

Source: RHB