SECOND board listed Ingress Corp Bhd, which aims to be an "Asean company with a global reach, is riding high on the bullish outlook for the motor industry locally and in Asean.

The company has positioned itself well in the local scene supplying components to national car manufacturers Proton and Perodua, and to global market through its presence in Thailand's "Detroit of Asia" car manufacturing hub.

Ingress executive vice-chairman Rameli Musa said the motor industry was set for a boom with the opening of markets through a series of tariff reduction beginning next year under the Asean Free Trade Area (Afta) market liberalisation scheme.

Malaysia will start with the auto liberalisation in 2005.

"When tariffs are removed, more people can afford to buy more cars, and this will push up the volume - thus benefiting the entire industry," he said during the recent company AGM/EGM.

Ingress' business can be divided into two-automotive components manufacturing (ACM) and the equally promising power engineering and railway electrification (PER).

On the local front, Ingress is also set to benefit from the bullish projection of motor vehicle sales this year, an estimated 6% growth to 410,000 units led by Proton and Perodua vehicles.

Proton and Perodua still control between 92% and 93% of the domestic passenger car market, and this would translate to a healthier sales volume for Ingress - projected at between 4% and 5% this year.

Ingress produces weatherstrip inner moulding, beltline moulding and door sash for Proton and Perodua - sales to the two national car manufacturers contributed between 42% and 45% to the company's total sales in the financial year end Jan 31, 2002.

Sales volume is expected to improve with the introduction of the Campro engine by Proton and subsequent launching of new models.

Analyst Hilmi Mokhtar from OSK Securities in his recommendation early last month said the stock has nearly 100% upside target at RM5.40 from its current price of RM2.90.

ACM contributes 76% to the company's sales last year, or 50% to earnings before interest, taxation, depreciation and amortisation (EBIT-DA).

"A good management team, healthy earnings outlook and huge potential for contract manufacturing works in Thailand are some of the positive things going for the company," said Hilmi.

The company's maiden overseas venture, which is the RM50mil automotive components plant in Rayong, near Bangkok, is already geared for an expansion plan in less than two years of operations.

"Growth will be from Thailand and we are putting more money there to seize the opportunity," said Rameli.

The growth potential of the overseas venture, Ingress Autoventures Co Ltd (IAV), is expected to be phenomenal.

It is expected to turn in a revenue of RM30mil this year, RM60mil next year and later to RM90mil.

The 73% joint-venture with Katayama Kogyo is putting in another RM41mil into new investments for mould and die machines.

This is to prepare the company for new product lines such as bellows and EGR pipes.

The customer base has grown to include big names like Honda, Isuzu, Mitsubishi and General Motors.

The company has also secured a contract to produce door sash for Honda Thailand's latest launch, the Fix, at the end of the year.

IAV is currently negotiating to supply parts for the Fit, another Honda product.

With IAV under its stable, Ingress is ahead of its Malaysian OEM competitors, and that is a key factor to the company's market positioning, post Afta environment.

"IAV will act as the cushion, should earnings from Proton decline in the post Afta area, beginning 2005," said Hilmi, adding that IAV will be a major driver to Ingress' financial performance, going forward.

"The company is expected to contribute about 45% of ACM sales by 2005. We believe IAV is in a strong position to secure other OEM contracts, given its strong reputation. Some of the existing clients have also been making requests for quotations for other products," he said in his report.

The company's PER division has also contributed positively to Ingress' financial performance.

EBITDA margins from the railway projects have averaged around 23% to 26%.

In the last financial year, PER contributed RM11mil in EBITDA to Ingress, a 17% decline year on year and was also lower than what the company had projected due to the delay of the Rawang-Ipoh project.

The railway electrification contract, worth RM406mil, is likely to be delayed until the end of the year, meaning that profit contribution would only filter through the bottom line in financial year ending January 2004.

Assuming an average EBITDA margin of 26%, the project would bring in an estimated RM105mil in profits over a period of two years.

Ingress is also likely to be awarded another contract worth RM35mil to RM40mil for the Sentul-Batu Caves project.

Valuation wise, Ingress' financials are still healthy despite having to fork out the RM41mil for the Thailand venture.

"This would certainly raise the current net gearing slightly from the current 6%. However, upon full commencement of IAV's operations in January 2004, Ingress' net debt will be reduced," said Hilmi.

At current market price of RM2.90, the stock is trading at a prospective price earnings ratio of about 6.6 relative to the market's 17 times.

"We have pegged the fair value for Ingress at 13 times prospective of 2002 earnings per share, which translates to a fair value of RM5.40," he said.

Furthermore, Ingress' paid-up capital at RM64mil has already met the KLSE minimum requirement for a main board company. A migration to the main board would give the company better access to institutional funds.

Online research house Surf88.com, in maintaining a buy on the counter, said Ingress should be able to meet its full year earnings per share forecast of 45 sen for the financial year ending January 2003 from the 41.5 sen previously.