Tan Chong : Temporary setback but riding stronger going forward

Outperform

3QFY09 Results

- Although 9MFY12/09 results only accounted for 64% and 69% of our full-year forecast and market consensus, we consider the results to be largely within expectations as we expects the negative impact from production cutback to reverse in 4Q09 as it ramps up production to meet deliveries.

- We expect the company to register a stronger rebound in 4Q09 on the back of: 1) order backlog carried forward from 3Q09; 2) margin expansion stemming from greater economies of scale and favourable exchange rate. Further out, we expect the company to register stronger unit sales growth stemming from economic recovery and improvement in consumer sentiments. Consequently, we have raised FY10-11 unit sales projections by 3.8% and 4.1% respectively, while keeping FY09 unit sales unchanged.

- Hence, we have raised our FY10-11 earnings projections by 16.7% and 14.1% respectively, while keeping our FY09 earning estimate unchanged. Accordingly, we have raised our fair value to RM2.92 (from RM2.50/share previously), which is based on unchanged 9x FY10 PER. Reiterate Outperform.