Big Canadian parts makers may grow even bigger

By John McCrank

TORONTO (Reuters) - Canada's top auto parts makers are likely to take more market share and new sales from their smaller rivals as the sector consolidates in the wake of the upheaval that drove General Motors Corp GMGMQ.PK and Chrysler into bankruptcy.

The size and scale of the big listed players, and the growing desire of automakers to assure stable supplies, mean their shares may still offer good value even after their recent rally, analysts say.

Magna International (MGa.TO: Quote), Martinrea (MRE.TO: Quote) and Linamar Corp (LNR.TO: Quote) were all hit hard as the crisis in the global auto industry deepened earlier this year, with their share prices hitting 2009 lows in March.

But the big Canadian companies have escaped the fate of some of their U.S. counterparts, such as Lear Corp (LEA.N: Quote) and Visteon Corp VSTN.PK, which were forced to file for bankruptcy.

"The Canadian companies have had good balance sheets and that's enabled them to do well," said David Tyerman, an analyst at Genuity Capital Markets.

Since March, Magna's stock has nearly doubled in price, Martinrea's has more than tripled, and Linamar's is more than five times higher. Analysts say there's still room for gains.

That's because the small "mom and pop shops" that represent the majority of Canadian suppliers have borne the brunt of the pain while the bigger, listed companies have been able to focus on increasing their market share.

"You have about 300 or 400 suppliers and I think half of them are going to go either bust or be acquired by somebody, and we're seeing this happening," said Youssef Abboud, an analyst at Clarus Securities.