KUALA LUMPUR: The Overnight Policy Rate (OPR) hike will have a negative impact on the automotive sector, says stock analyst CIMB Equities Research.
This is because it could affect consumer affordability, especially in the mass market segment and lead to more stringent loan approvals by the banks.
CIMB Research said the recent 25bp rate hikes would generally hit cyclical sectors such as property, auto as well as consumer.
Proton and Perodua could be affected by this given their exposure to the mass market, it said. "In addition, the sector will also be impacted by expected higher interest cost given the high gearing level for most companies, except Bermaz," it added.
Although DRB-Hicom is likely to be the most affected on absolute value of about RM12mil from the hike in interest cost, the impact on its net profit is estimated to be less than 3%.
However, CIMB Research said there would be a potential 15% impact on Tan Chong’s earnings in FY18F from a 25bp hike in interest expense due to its lower earnings base. It predicted that the Tan Chong group would only break even in FY19F.
“It is also negative for companies with high gearing in ringgit borrowings as it will result in higher interest expense."
