Stock Name: UMW
Company Name: UMW HOLDINGS BHD
UMW Holdings Bhd
(July 19, RM7.50)
Maintain hold at RM7.47 with target price of RM7.20: We remain less upbeat on UMW's midterm prospects, with concerns still over some issues in the automotive and oil and gas (O&G) divisions. We expect softer year-on-year vehicle sales in 2011, dogged by global supply chain disruption and amendments to the Hire Purchase Act. O&G will likely underperform in 2011. We are also not ruling out the disposal of its non-core O&G operations as it revamps the division. With the ongoing operational issues, the listing of its O&G division is unlikely to take off soon. We maintain our 2011/12 earnings forecasts. Our RM7.20 target price, based on 12 times 2012 earnings per share, is unchanged.
We are keeping our vehicle sales forecasts for 2011 unchanged, expecting a lower 90,000 units (-3% y-o-y) for Toyota and 172,000 units (-9% y-o-y) for Perodua. We are on track with internal forecasts for Toyota but are 12% below UMW's target for Perodua (195,000 units). We reiterate that the global supply chain disruption from Japan's earthquake and tsunami and recent amendment to the Hire Purchase Act will affect orders and delivery. April/May car sales concur with our apprehension with Toyota and Perodua sales contracting 9% to 23% and 13% to 26% y-o-y respectively.
We have a contrarian view, for the internal expectation is more optimistic. We expect 22.3%-associate WSP Holdings Ltd operations to remain challenging in 2011, hit by the anti-dumping and countervailing issues in the US and intense competition in China. While Naga 1 is giving decent returns, we think that Naga 2 & 3 will fall below expectations and deliver razor-thin margins, owing to high operating costs.
Stern Stewart & Co, a management consultant, has been engaged to conduct an economic value added (EVA) programme on some of UMW's major investments. The management is tight-lipped on this but we suspect the review is largely on the O&G division. We opine that UMW will continue to focus on its rig charter and pipe manufacturing businesses but could dispose non-core assets (fabrication). ' Maybank IB Research, July 19
This article appeared in The Edge Financial Daily, July 20, 2011.
Company Name: UMW HOLDINGS BHD
| Research House: MAYBANK | Price Call: HOLD | Target Price: 7.20 |
UMW Holdings Bhd
(July 19, RM7.50)
Maintain hold at RM7.47 with target price of RM7.20: We remain less upbeat on UMW's midterm prospects, with concerns still over some issues in the automotive and oil and gas (O&G) divisions. We expect softer year-on-year vehicle sales in 2011, dogged by global supply chain disruption and amendments to the Hire Purchase Act. O&G will likely underperform in 2011. We are also not ruling out the disposal of its non-core O&G operations as it revamps the division. With the ongoing operational issues, the listing of its O&G division is unlikely to take off soon. We maintain our 2011/12 earnings forecasts. Our RM7.20 target price, based on 12 times 2012 earnings per share, is unchanged.
We are keeping our vehicle sales forecasts for 2011 unchanged, expecting a lower 90,000 units (-3% y-o-y) for Toyota and 172,000 units (-9% y-o-y) for Perodua. We are on track with internal forecasts for Toyota but are 12% below UMW's target for Perodua (195,000 units). We reiterate that the global supply chain disruption from Japan's earthquake and tsunami and recent amendment to the Hire Purchase Act will affect orders and delivery. April/May car sales concur with our apprehension with Toyota and Perodua sales contracting 9% to 23% and 13% to 26% y-o-y respectively.
We have a contrarian view, for the internal expectation is more optimistic. We expect 22.3%-associate WSP Holdings Ltd operations to remain challenging in 2011, hit by the anti-dumping and countervailing issues in the US and intense competition in China. While Naga 1 is giving decent returns, we think that Naga 2 & 3 will fall below expectations and deliver razor-thin margins, owing to high operating costs.
Stern Stewart & Co, a management consultant, has been engaged to conduct an economic value added (EVA) programme on some of UMW's major investments. The management is tight-lipped on this but we suspect the review is largely on the O&G division. We opine that UMW will continue to focus on its rig charter and pipe manufacturing businesses but could dispose non-core assets (fabrication). ' Maybank IB Research, July 19
This article appeared in The Edge Financial Daily, July 20, 2011.
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