Sales expected to continue to pick up in auto sector

Toyota and Perodua (above) cars commanded a 45.5% share of the Malaysian market in 2009

Companies such as Proton and MBM Resources Bhd, which has a large stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua), managed to post higher earnings in the fourth quarter compared with the same period a year ago.

Tan Chong Motor Holdings Bhd too reported better earnings in the fourth quarter as it gained from a stronger ringgit and better sales.

�Things will look up from the first quarter onwards,� said OSK Research analyst Ahmad Maghfur Usman.

Hafriz expects earnings growth of 43% to 52% for the current financial year for the auto stocks it covers.

In terms of biggest surprises, Hafriz said that would be the increase in profit margins.

�The market may have underestimated benefits from economies of scale derived from better plant utilisation and lower discounting activities,� he said.

For the more diversified auto groups such as UMW and DRB-HICOM Bhd, their results headed at opposite direction.

For UMW, its auto businesses during the quarter held up as higher sales of cars and auto parts were recorded by the company in that segment. The company noted that Toyota and Perodua cars commanded a 45.5% share of the Malaysian market in 2009.

But the company posted lower profits during the quarter as it was dragged by some of the group�s other operating segments.

For DRB-HICOM, net profit during the quarter more than doubled from a year ago as the company saw higher contributions from its services segment. The diversified group announced a 125% rise in profit to RM103.5mil during the quarter, which was the company�s third quarter of its fiscal year.

The story of the earnings period could have belonged to the auto parts suppliers, especially APM, which posted its best ever revenue during the quarter as sales within Malaysia surged. Net profit rose about five fold to RM25.5mil from RM5.1mil.

EP Manufacturing Bhd too posted stronger profits from the introduction of new cars by Proton and Perodua. New Hoong Fatt Holdings Bhd, which makes replacement panels for cars, also saw earnings improve in the fourth quarter year-on-year despite taking a sizeable impairment charge.

Ahmad Maghfur concurred and said in general higher sales by Proton and Perodua lifted the performance of the parts suppliers.

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