KUALA LUMPUR (Oct 4): UOB Kay Hian said Pecca Group Bhd is poised to benefit from the growing Malaysian automobile industry, driven by higher total industry volume (up 12% year-to-date) and supported by healthy backlog orders.
In a note on Wednesday, the research house, which does not have a rating for Pecca, said the original equipment manufacturer (OEM) segment contributed 86% of Pecca's total revenue, while the remaining 14% is attributed to the pre-delivery inspection and replacement equipment manufacturer (REM) markets.
It said the company's brand coverage is diversified into mass-market customers, including both national and non-national brands such as Perodua, Proton, Toyota, Nissan and Mitsubishi.
“Combining the positive momentum reflected in higher vehicle sales despite the absence of sales and service tax exemption and higher penetration of mass-market customers, we assume that Pecca continues to benefit from the improved demand, coupled with a healthy plant utilisation rate of 85% to 90%, which positions it well to meet demand.
“Other prospects appear promising, supported by its strategic initiatives and plans, including i) the completed acquisition of PT Gemilang Maju Kencana (GMK) in May to expand its presence in the Indonesian market; ii) the expansion plan for the OEM segment to cover entry-level, mid-level, and luxury brands; iii) facilitating growth of the REM business across Malaysia and globally in countries such as Europe, the US, Australia, New Zealand, Dubai and Singapore; and iv) capturing of new opportunities, including Tier-1 manufacturers and the electric vehicle market.
“While the Malaysian market currently accounts for over 90% of Pecca's overall existing sales, there is significant growth potential in Indonesia, leveraging GMK’s extensive partnership and the number of population to impact vehicle demand,” it said.
At 11.45am on Wednesday, Pecca had shed 0.83% or one sen to RM1.19, with 3.83 million shares traded.