We continue to maintain our OVERWEIGHT call on the Auto sector, which will continue to remain favorable next year pointing that valuations remain attractive. Our top pick for the sector is now UMW, given the stock’s laggard performance and in view of the turnaround in its oil and gas bolstering FY11 profitability. Nevertheless, we continue to like Tan Chong in view of its earnings trajectory over the next 3 years as it transforms into a regional player from its exposure in the Indochina and BIMP-EAGA market. On the autoparts side, Delloyd Ventures is our favorite pick in favour of its Indonesian exposure from both the autoparts and plantation division, of which, valuation for the latter remains undemanding despite the recent rally in CPO prices.
Below are the target prices for automotive sector.
| Stock | Price (RM) | Target (RM) | Market Cap (RMm) | Rating |
|---|---|---|---|---|
| TCHONG | 5.60 | 7.29 | 3763.2 | Buy |
| EPMB | 0.52 | 0.82 | 86.3 | Buy |
| NHFATT | 2.28 | 2.85 | 171.4 | Buy |
| PROTON | 4.80 | 6.62 | 2636.2 | Buy |
| UMW | 6.80 | 8.38 | 7826.6 | Buy |
| MBM | 3.10 | 5.00 | 752.3 | Buy |
| DELLOYD | 3.18 | 3.90 | 295.8 | Buy |
Source : OSK Research