Kenanga Research says it is mindful of HIL Industries inherently having little bargaining power against its large automaker customers
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00:00 Plastic Solutions provider and property developer HIL Industries is our stock in focus today.
00:07 Kenanga Research keeping its underperformed call and target price of 87 cent.
00:12 The counter closed yesterday at 92 cent.
00:15 HLI Industries announced earlier this week that it is buying a company that owns land near the Shah Alam Klang border
00:21 that has been earmarked for residential development in a related party transaction.
00:26 Price tag is 46 million ringgit. Kenanga says it translates to 360 ringgit per square foot, which is a decent deal.
00:35 Estimated GDV stands at 380 million to 400 million ringgit,
00:39 which could boost Kenanga's valuation for HIL's property business by about 22%
00:45 and its SOP-derived target price by 10%.
00:48 Pending completion of the deal, the research house is making no changes to its forecasts.
00:53 As for its outlook, Kenanga believes HIL's manufacturing division will continue to do well
00:59 but is mindful of the company inherently having little bargaining power against its large automaker customers.
01:06 That puts it in a rather precarious situation in a rising cost environment.
01:10 Also, from the standpoint of equity investors, they have better proxy to the booming local auto market
01:16 via significantly larger and more liquid automakers and distributors.
01:21 On the property sector, Kenanga is cautious on the outlook.
01:24 Given the elevated mortgage rates, while lending remains restricted,
01:28 consumers may also postpone purchases amid high inflation.
01:32 Quick look at consensus, according to Bloomberg data, it's just Kenanga at the moment.
01:37 So to recap, we've got one cell, target price 87 cent.
01:41 That's 5.4% lower than HIL's last close of 92 cent.
01:46 [Music]