EPMB’s 4Q numbers were hit by higher raw material prices and
interest expenses although these were
offset by a tax deferred credit. The higher costs led to
a sharp drop in margins, which shrank 3ppts to 3.34%. We remain positive
on EPMB as we expect the company’s earnings
to be propelled by higher revenue from Proton and Perodua. As
such, we maintain our earnings projections, with our BUY call retained. Our FV
of RM1.38 is premised on a cheap 5x FY12 PE.
Hit by higher
financing costs. EPMB recorded a poor set of results operationally in 4Q as
its financing costs soared 42% q-o-q and 107% y-o-y amid higher raw material
prices, despite chalking up stronger sales during the quarter. Nonetheless, its weaker bottomline was offset by a substantial
deferred tax credit, which cushioned the overall impact. Stripping
off unrealized forex losses which
we consider as exceptional items, EPMB reported a FY11 core net profit of
RM39.4m (y-o-y: +53%, 4Q: q-o-q: -4%) on the back of RM577m revenue (y-o-y:
-2%, q-o-q: +19%), which was in line with our estimate but slightly above
consensus.
4Q margins pinched.
4Q margins shrank as raw material
prices shot up, causing the company’s
EBIT margins to halve to 3.34% from 7.3% in the previous quarter. We also suspect
that this could also be due to higher depreciation costs.
Prospects remain
bright on more contracts. We remain
positive on EPMB as the company’s earnings are
to be boosted by higher revenue,
spurred by the upcoming launch of
Proton’s new Persona replacement sometime in the next 2 months. We understand that
EPMB is supplying
the auto components for this model. Meanwhile, Perodua is also expanding
aggressively into the export market, which bodes well for EPMB. The carmaker is
also said to be looking to expand to the Middle East market.
Maintain BUY. We
maintain our earnings projection, with our BUY call retained. Our FV of RM1.38
is premised on a cheap 5x FY12 PE.
Source: OSK188
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