Tuesday, January 18, 2011

New Hoong Fatt 7060

New Hoong Fatt's business is strongly related to malaysian passenger car market. It is the country's largest replacement parts maker by the market share in Malaysia.

The outlook of the business seems profitable as it has largest share market in Malaysia with the increase of cars in the country. However due to this reason, the growth of the business will also follow the number of cars in malaysia, which mean about 5%.

Its competitors in the market are APM Automative Holdings Bhd, Delloyd Ventures Bhd, Hirotako Holding Bhd.

Due to competition from the competitors, there is always a competition price war in the market as the buyer tend to buy for the cheapest products. So in order to survive in the price war, production cost  is crucial. Any volatile of steel and plastic resin raw-materials prices will effect the company's profit margin.

This year NHFatt will allocate around RM 30 million for capital expenditure, of which RM 10 million will be spent on production development and the balance on buying new machinery for its plastic manufacturing division.

The company currently is running at 80% capacity and there will be a expansion of production capacity more than 15% in end of the year 2011.

OSK research put a BUY call with a target price RM 2.85 based on a forward (year 2011) PE 6.0
MIMB investment Bank also put a BUY call with target price RM 3.00 based on FY 2011  PE 7.9

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.