The recovering economy and the elimination of duties on auto and parts under the AFTA scheme in 2010 worked in favor of the domestic auto parts industry.
With its business strongly correlated to the Malaysian passenger car market, New Hoong Fatt – which is Malaysia’s largest replacement parts maker by market shares - has great prospects.
The trend is likely to continue in future, judging by Malaysia’s favourable young population demography.
Its focus on the replacement equipment market is not subject to the volatility of new car sales. It is able to sustain its revenue and profit growth during the global financial crisis in 2008 and 2009.
It is underperformance could be due to the tight liquidity of the stock and the volatility of steel and plastic resin war material prices. It is also because of heightened competitiveness in the replacement parts market. AFTA scheme may open new avenues for auto and auto parts players, it can also be a threat to others, with more competitive pricing and a greater number of players in the market. Also, unlike with the OEM or OEM market, replacement parts manufacturers have no cornerstone customers and buyers tend to opt for the cheapest products.
In the face of heightened competition, it is allocating some rm30 million for capex in FY2011.
Its net gearing ratio increased to 5.6% year on year. Its net assets per share rise to rm3.27 as at Dec 31, 2009.
Its re rating hinges on its ability to develop new export markets to expand its scale of business.
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