In the News: 2005
Thai Auto-Parts Stocks May Rally as Toyota Expands
Bloomberg
9 February 2005
Auto-parts makers such as Thai Stanley Electric Pcl, which were some of Bangkok's worst-performing stocks in 2004, are among the best this year as carmakers including Toyota Motor Corp. expand in Thailand to cut costs. The 15-member SET Automotive Index has climbed 13 percent this year, the third-best of 27 industry groups in the SET Index, which has risen 9.5 percent. The gains, and increasing production in the country by carmakers including Toyota and Honda Motor Co., prompted initial public share sales from parts makers Yarnapund Pcl and KPN Automotive Pcl. Those stocks have risen by as much as 40 percent since they began trading last month.
"The manufacturers are relocating here, and business is as good as it has ever been," said Robert Penaloza, deputy chief investment officer in Bangkok at Aberdeen Asset Management Co., which owns shares of Thai Stanley, the nation's biggest auto-parts maker, and Aapico Hitech Pcl among $600 million in Thai assets. Auto parts will "continue to do well
Thailand is the biggest manufacturing base in Southeast Asia for Toyota, Honda, General Motors Corp. and Ford Motor Co. The carmakers are boosting production and exports to meet rising demand in the region.
Toyota, the world's second-largest automaker by sales, plans to boost production at its Thai plants by almost half this year to 405,000 vehicles, according to a statement the Japanese company released on Jan. 17. That's about 5 percent of Toyota's predicted global output of 8.12 million units. Shares of Yarnapund, a maker of exhaust systems and pedals for Toyota and Honda, have jumped 40 percent from their offer price since the stock's Jan. 13 debut. The shares were unchanged at 18.70 baht as of 10:48 a.m. today in Bangkok.
KPN Automotive, which makes molded parts for cars and motorcycles, has gained 32 percent since opening on Jan. 26. The shares fell 0.5 percent today to 19.70 baht.
Lights, Axles
Thai Stanley, the country's biggest publicly traded auto supplier, has gained 18 percent this year as the maker of vehicle lights reported a 70 percent increase in net income for the quarter ended Dec. 31. The stock rose 0.7 percent in early trade to 154 baht.
Toyota, Thailand's biggest auto-assembler, buys most of its headlights, taillights, seats, axles and brakes from local suppliers.
"Toyota will increase the proportion of parts that are made by domestic suppliers in all of our vehicles," Ryoichi Sasaki, president of Bangkok-based unit Toyota Motor (Thailand) Co. "Use of local parts has made our vehicle competitive in term of price. The quality of local parts has improved significantly over the past few years.
Total car sales in Thailand this year may rise 10 percent to 690,000 from 2004, according to Toyota, which compiles the country's car sales data each month.
Bird Flu
The SET Automotive Index last year dropped 26 percent, after more than doubling in 2003, as the spread of bird flu, escalating violence in the south, and high oil prices prompted investors to move money to stocks such as Aromatics (Thailand) Pcl that benefited from rising global chemical prices.
Auto parts stocks "had a good run two years ago and then attention died as petrochemicals were favored," Aberdeen's Penaloza said.
Yarnapund raised 500 million baht in an initial public offering in December and has a market value of 4.7 billion baht, about 40 percent of that of Thai Stanley. KPN Automotive has a market value of 1.9 billion baht. Somboon Advance Technology Pcl, which makes axles and brakes for Toyota and other Japanese carmakers, jumped 29 percent in its trading debut on Jan. 31.
"It's the right time" to go public, Somboon Vice President Chamnan Thamcharoen said in an interview on Feb. 2. "Two other auto stocks had risen, and it shows the market has interest."
Close Contact
The component maker raised almost 1 billion baht selling 25 percent of the company in January to expand a factory in Rayong province and cut its 3 billion baht debt.
"We are in close contact with Honda and other customers when they want to increase their production," Thamcharoen said. "They have to inform us six months ahead."
Thai Stanley trades at 11.7 times fiscal 2005 earnings, more than a multiple of 16.3 for Aichi, Japan-based Denso Corp., the biggest publicly traded automotive parts maker in Asia, based on analysts' estimates compiled by Thomson Financial.
Other auto parts companies plan to follow Yarnapund and KPN Automotive with stock sales.
Single Point Parts (Thailand) Pcl, which makes electronic components in cars, sold 50 million shares, or 20 percent of the company, to the public for 2.40 baht each this week.
Indian Trucks
About 10 component makers plan to have their shares start trading this year, according to the Stock Exchange of Thailand, which declined to identify the companies.
Thai Summit Autoparts Industry Co., which sold $600 million of auto parts last year, may sell shares next year, executive vice president Thanathorn Juangroongruangkit said. Thai Summit is in talks to assemble vehicles for Ashok Leyland Ltd., India's second-largest truckmaker.
Some investors say a glut of stock sales may make auto-component shares less attractive. "We've had a number of IPOs and some of the underwriters scraping the bottom of the barrel," said Lance Depew, who helps manage more than $250 million in at Quest Capital Ltd. "Some of the issues we've seen aren't attractive." He said his fund doesn't own shares in auto-parts makers. Automakers say demand for local parts will rise as production expands.
The Thai auto industry "has already a furnished supplier infrastructure, so we can make use of those suppliers," Yoichi Aoki, president of Honda Automobile (Thailand) Ltd., a unit of Japan's third-largest automaker, said in an interview.
Honda's plant in Ayudhya province, 50 kilometers (31 miles)north of Bangkok, is running at capacity of 120,000 units a year, and may be expanded to boost production, he said, declining to elaborate. The automaker buys parts from Thai Stanley, Somboon and Yarnapund.
"Automobile industry stocks still look interesting," said Piyasvasti Amranand, chairman of Kasikorn Asset Management Co.,which handles $3.9 billion, including shares in Thai Stanley and Aapico, a maker of car-assembly jigs. "They have been probably neglected too much in the past year."
