Industry Comparison – Automotive Parts (Metals Part & Heat Exchange)

Sector                 : Industrial Products & Services

Sub Sector         : Auto parts

This comparison would look into companies that manufacture and trading automotive parts (Metal Part & Heat Exchange). Company manufacturing and trading automotive interior, plastic and batteries are excluded in this comparison. The companies are:

1) APM(5015) – APM AUTOMOTIVE HOLDING BERHAD

2) EPMB(7773) – EP MANUFACTURING BHD

3) MCEHLDG(7004) – MCE HOLDINGS BERHAD

4) SAPIND(7811) – SAPURA INDUSTRIAL BERHAD

5) SMISCOR(7132) – SMIS CORPORATION BERHAD

Competitiveness

Market shares is an importance indicator to determine the competitiveness of the company. Total revenue make from manufacturing and trading of metal part & heat exchange for automotive industry for the year 2018 is RM 1,268,272,929.

COMPANY	REVENUE (AUTOMOTIVE PARTS) 2018 (RM)	MARKET SHARE (%)
APM (5015)	408,307,000	32.19
EPMB (7773)	472,602,000	37.26
MCEHLDG (7004)	62,539,164	4.93
SAPIND (7811)	209,166,765	16.49
SMISCOR (7132)	115,658,000	9.12

EPMB and APM is the top two companies for 2018 in term of market share which are 37.26 %and 32.19 % respectively. Both companies add up to have 69.45 %.

Operational

For operational, operating income of the companies had been review. Operating income determine how much the companies’ revenue had turn into profit after reduction cost of operating expense.

Besides operating income, operating margin ratio is also calculated. Companies with higher operating margin ratio have more probability to survive in today financial crisis. The median operating margin ratio for this group of companies for 2018 is 1.28 %.

COMPANY	2018 OPERATING INCOME (RM)	2018 OPERATING MARGIN RATIO
APM (5015)	26,220,000	6.42
EPMB (7773)	6,045,000	1.28
MCEHLDG (7004)	-1,162,806	-1.86
SAPIND (7811)	7,479,810	3.58
SMISCOR (7132)	-1,062,000	-0.92

As a value investor, company with negative operating income would be considering disqualified from the evaluation. Hence MCEHLDG and SMISCOR would be disqualified. Even though EPMD has positive operating income in 2018 but EPMD had negative operating income for 2017. So EPMD would be disqualified as well.

APM had the highest operating margin ratio which is 6.42 compare to it peers with a median operating margin ratio of 1.28.

Sustainability

For the sustainability of the business, debt of the companies is being review. There are two criteria to look at interest coverage ratio , which is used to determine how easy the companies able to pay off the interest of outstanding debt and debt ratio . 

The median debt ratio for 2018 is 0.37.

COMPANY	2018 INTEREST COVERAGE RATIO	2018 DEBT RATIO
APM (5015)	7.01	0.24
EPMB (7773)	0.41	0.55
MCEHLDG (7004)	-3.98	0.12
SAPIND (7811)	3.84	0.48
SMISCOR (7132)	-2.14	0.37

APM is the best company for sustainability because it has high interest coverage ratio and low debt ratio.

Summary

In summary a point is given to each company to evaluated each company competitiveness, operational and sustainability. Points given are as follows:

Competitiveness

Criteria	Point
Greater than 30 % Market Shares	5
20.01 % - 30.00 % Market shares	4
10.01 % - 20.00 % Market shares	3
5.01 % - 10.00 % Market shares	2
1.00 % - 5.00 % Market shares	1
Less than 1%	0

Operational

Criteria	Point
Greater than 2.05  Operating Margin	5
2.01 – 2.05 Operating Margin	4
1.51 – 2.00 Operating Margin	3
1.01 – 1.50 Operating Margin	2
0.51 - 1.00  Operating Margin	1
0.00 – 0.50 Operating Margin	0
Less than 0	Disqualified

Sustainability

Criteria	Point
No Financial Cost	2
Greater than 5 Interest Coverage Ratio	1
Less than 5 Interest Coverage Ratio	0

Criteria	Point
Less than 0.25	3
0.25 – 0.40	2
0.40 – 0.55	1
Greater than 0.55	0

COMPANY	Competitiveness	Operational	Sustainability	Total
APM (5015)	5	5	4	14
EPMB  (7773)	5	DIS	1	DIS
MCEHLDG (7004)	1	DIS	3	DIS
SAPIND   (7811)	3	5	1	9
SMISCOR   (7132)	2	DIS	2	DIS

From the evaluation above, APM (14 points) is qualified for further analysis.

However investor shall take note that this industry only contribute 32.19 %  of APM 2018 revenue. APM also operate in other sectors which is interior & plastic segment which is 56.17 % of APM 2018 revenue.

Summary of Stock Reviews

Summary of Industry Comparison