Delloyd is a tier one manufacturer of automotive parts and components that has in the past few years made a foray into palm oil plantation with a total planted area of 12,300 ha. Delloyd’s auto segment also manufactures bus chassis in Indonesia through a JV with an Indonesia partner, in addition to owning an exclusive distributorship for Beiqi Foton to import buses and bus chassis. On the local front, it also owns several dealerships in Malaysia selling a variety of marques. Its core activity is the manufacturing of door mirrors and window regulators to a wide range of automotive manufacturers.
KEY HIGHLIGHTS
A recovery play on TIV volume. We see Delloyd Ventures well-positioned in the domestic automotive market given its status as a tier-1 supplier to the two national automakers. This bodes well for Delloyd as TIV is expected to touch a new high this year. The company has been able to nurture long term relationships by offering workable product designs from the conceptual stage to the prototype stage, and subsequently to the end product itself. The recovery in volume augurs well for Delloyd’s car dealership business as the company
trims down the number of branches from 7 to 4 to improve productivity. Venturing into bus chassis in Indonesia. Delloyd’s venture into the commercial vehicle manufacturing segment following a 51% stake acquisition of PT Asian Auto International will broaden its future overseas revenue base as more orders of its CNG buses are delivered. Delloyd expects to clinch
29 additional buses sometime within the next 2 months. The CNG buses, named KOMODO, will be supplied to the Indonesian government to cater for the growing needs for public transportation in Jakarta. We understand that PT Asian Auto International stands is the strongest bidder, noting that it has already supplied 13 CNG buses and has received satisfactory feedback on the stability of the buses as the bus platforms had to be elevated to enable them to park into the high platforms at bus stations.
Plantation a new engine of growth. Delloyd currently owns two palm oil estate with a total area of 14422 ha and 1449 ha in Belitung (in Kalimantan) and Malaysia respectively. We see more room for growth on the Indonesia side as its immature and unplanted area represents 60% of the estate. Yield there has also improved drastically from 3 tonne/ha to 12.96 tonne/ha at a total FFB production of 75,408 tonnes last year. The company also began constructing
its frst palm oil mill in May 2008 with an initial capacity of processing 60 tonnes
FFB / hour. This mill, which was completed in early 2010, will serve all its estates in Belitung and accept FFB from surrounding smallholder plantations. With the existence of its mill, Delloyd expects to improve revenue and margins from selling CPO rather than non processed FFB.Strong balance sheet. Compared with its local auto peers, Delloyd has a sound balance sheet backed by a low gearing, which is a rarity among its peers. Historically, Delloyd has been known for its sound net cash position. We understand that the venture into plantations has required substantial capex, thus raising its net gearing to 6% as of end-FY0
Should monitor closely. Should start to accumulate at below RM2.50
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