Business Times reported that VW may be looking to make Kuala Lumpur its auto parts sourcing hub. Quoting Volkswagen Group Malaysia‘s managing director, Andreas Prinz, it said the Group's global sourcing unit will be setting up a small department in Malaysia within the next few months. It is speculated that negotiated are currently on the table, with various
parties namely DRB-Hicom and possibly even Proton, along with other local auto component makers. The Group is also looking to maximise localising its CKD content by 40% over the immediate- to medium-term.
Maintain OVERWEIGHT. We continue to retain our OVERWEIGHT recommendation for the auto sector, backed by the stronger than expected vehicle sales, as well as the potential of a further liberalisation in the sector, which may bring in more foreign partnerships. Our calls across our coverage are BUYs (Proton: TP RM4.24, MBM: TP RM2.87, TCHONG: TP RM2.35, NHFATT: TP RM2.22) while UMW is retained at a SELL with a TP of RM4.71 given its stretched valuations. EPMB, which saw its share price surge yesterday, possibly owing to this piece of news, has been downgraded to SELL with our TP retained at RM0.32 at this juncture pending confirmation of the company being a beneficiary of VW's upcoming plan.
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