Stock Name: UMW
Company Name: UMW HOLDINGS BHD
Research House: AMMB
KUALA LUMPUR: AmResearch reaffirmed its HOLD rating on UMW Holdings with an unchanged fair value of RM6.50 a share on concerns that the global automotive supply chain disruption will impact local players' performance, in particular, UMW..
'Our sum-of-parts-derived valuation continues to peg UMW's auto division at 9 times FY11F earnings, at par to industry average given increasing earnings uncertainties arising from parts supply disruption,' it said.
AmResearch said Toyota Motor announced it will begin raising production at plants in Japan in July and at overseas plants in August. However, all plants will only resume normal production towards November or December this year.
In a related development, UMW indicated it was cutting production to single shift from April 25 until June 3.
Operations from June 6 onwards would hinge on the availability of parts supply. Recently, Toyota and Perodua indicated they only have sufficient inventories till May (at the prior production rate of 4,433 units/month, on average).
'In hindsight, we would anticipate Perodua to announce production cuts in the near-term as well,' it said.
AmResearch said these developments strongly underline our concerns that the global automotive supply chain disruption will catch on to local players' performance, in particular, UMW.
'We had earlier this month cut our FY11F earnings for UMW by 5%.'' We project UMW to register a lacklustre 3% FY11F earnings growth as a result of: (1) slower unit sales recognition and; (2) rising unit fixed cost given lower plant production rate.
'UMW remains the most expensive auto stock in our universe, trading at 11x FY11F earnings despite developing earnings uncertainties surrounding its auto division, which we estimate would account for some 83% of FY11F earnings,' it said.
Company Name: UMW HOLDINGS BHD
Research House: AMMB
KUALA LUMPUR: AmResearch reaffirmed its HOLD rating on UMW Holdings with an unchanged fair value of RM6.50 a share on concerns that the global automotive supply chain disruption will impact local players' performance, in particular, UMW..
'Our sum-of-parts-derived valuation continues to peg UMW's auto division at 9 times FY11F earnings, at par to industry average given increasing earnings uncertainties arising from parts supply disruption,' it said.
AmResearch said Toyota Motor announced it will begin raising production at plants in Japan in July and at overseas plants in August. However, all plants will only resume normal production towards November or December this year.
In a related development, UMW indicated it was cutting production to single shift from April 25 until June 3.
Operations from June 6 onwards would hinge on the availability of parts supply. Recently, Toyota and Perodua indicated they only have sufficient inventories till May (at the prior production rate of 4,433 units/month, on average).
'In hindsight, we would anticipate Perodua to announce production cuts in the near-term as well,' it said.
AmResearch said these developments strongly underline our concerns that the global automotive supply chain disruption will catch on to local players' performance, in particular, UMW.
'We had earlier this month cut our FY11F earnings for UMW by 5%.'' We project UMW to register a lacklustre 3% FY11F earnings growth as a result of: (1) slower unit sales recognition and; (2) rising unit fixed cost given lower plant production rate.
'UMW remains the most expensive auto stock in our universe, trading at 11x FY11F earnings despite developing earnings uncertainties surrounding its auto division, which we estimate would account for some 83% of FY11F earnings,' it said.
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