Wednesday, 23 September 2015

Stock Review – APM (5015) (APM AUTOMOTIVE HOLDINGS BERHAD)


image source from Big Chart Marketplace

image source from Big Chart Marketplace
Bursa Malaysia - 5015
Bloomberg - APM:MK
Yahoo - 5015 .kl
Webpage - http://www.apm.com.my/

Key Value Investor Criteria: -

Description
Value
Criteria
Point
Price to Tangible Book Ratio
0.68*
< 1
5/5
Stock Valuation
CAPM => 3.21%
Return (2008-2014) => 20.93%
Undervalue by 17.72%
CAPM < Return
5/5
Return on Asset
5.54*
> 0
4/5
Return on Common Equity
7.97*
> 0
4/5
Quick Ratio
2.55*
>1
5/5
Long term Debt / Total Capital
-*
<50%
5/5
Continue Dividend over Past 10 Years / Since Inception
Yes
Yes
2/2
Cash From Operation
Positive > 5 years
Positive
5/5
Total Point


35/37
Note:
 *            Data obtain from Bursa Marketplace on 21/9/2015

By scoring 35/37 (94.59%), we will look into the annual report and the latest quarterly report of APM before making the decision to buy the stock.

Company Profile

APM consists of three main business segment as followes:
  1. Interior and plastic – 61.8% of total profit (2014 Annual Report)
  2.  Electrical and Heat Exchanger – 17.4% of total profit (2014 Annual Report)
  3.  Suspension – 15.0% of total profit (2014 Annual Report)


1)   Interior and Plastic Division

These division is the largest division of APM, it consists of 3 major subsidiary; Auto Parts Manufactures Co Sdn Bhd (Train Seats,  Ferry Seats, Industries Seats, Bus Seats & Cinema Seats), APM Plastic Sdn Bhd (Interior Plastic Part, Exterior Plastic Part, Extrusion Component & PU Padding) and Fuji Seats (Malaysia) Sdn Bhd (Vehicle Seats)

2)   Electrical and Heat Exchanger

There are two subsidiary in these division; APM Auto Electrics Sdn Bhd (Starter Motor, Alternator, Wiper Motor, Electronic Control Unit) and APM Climate Control Sdn Bhd (Air Conditioning System, Radiator)

3)   Suspension Division

These are the third largest division of APM. It consists of 3 subsidiaries: APM Shock Absorber Sdn Bhd (Shock Absorber and Gas Spring), APM Spring Sdn Bhd (Leaf Sping and Parabolic Spring) and APM Coils Spring Sdn Bhd (Coil Spring). APM Spring Sdn Bhd had plant in Ho Chi Minh, Vietnam.

PROS:

  • Rapid KL is planning to have 120 buses hitting the street in September 2015 these might increase the sales of APM bus seats.

CONS:

  • The downturn of automotive industry in Malaysia especially after the GST might affect the profit of APM since the company is manufacturing automobile products and most selling to Malaysia automotive manufacturer.
  • The new KTM ETS train model KTM class 93 from CSR Zhuzhou is reported imported all its components from China these will cause APM to lose their business on the train seats and hence the revenue will decrease.

Operation outside Malaysia

APM currently have three manufacture plants outside Malaysia which are Indonesia (automotive interior product, coil springs and seats), Australia (Radiator), Vietnam (Spring). With the uncertainty of Malaysian Ringgit currently, it might be good to operations outside Malaysia to prevent the drop of Malaysian Ringgit.
Currently APM had two plants building at the same time in Thailand and Indonesia (complete end 2015). With the current slow down of automotive capacity, these might not be the best time to have the manufacturing plant completed. APM might not able to fully utilised these manufacturing capacity due to market slow down.

PROS:

  • Operation outsides Malaysia help to prevent lost from devaluing of Malaysian Ringgit.

CONS:

  • Completion of Indonesia manufacturing plant in Indonesia end of these year might not be fully utilised by APM because the slow down of automotive industry.

Financial Statement

The property, plant and equipment (PPE) of APM increase by 73.46% or RM 171,980,000 compared to year 2013 (restated). However there is a revaluation surplus of RM 115,928,000 from level 3 revaluation based on estimation.

From the 2014 annual report, the  acquisition of McConnell Seats Australia Pty Ltd which cause trademark of RM 4,313,000 and goodwill of  RM 6,696,000 and had increase the loan and borrowing from RM 12,847,000 (2013) to RM 39,228,000 (Jun 2015)

CONS:

  • RM 115,928,000 from level 3 revaluation is fully based on estimation. The PPE might not price at the prices.
  • Trademark of RM 4,313,000 and goodwill of RM 6,696,000 which the managements able to impaired anytime.