WHILE UMW Holdings Bhd can expect a sturdier quarterly results, its yearly performance is likely to remain sluggish.
For its 4Q FY2020, JF Apex Securities Research foresees that the conglomerate’s auto segment will post massive growth buoyed by stronger domestic Toyota and Perodua car sales given sales tax exemption, massive campaign and promotional activities to clear up inventories as well as launching of Toyota Yaris and Toyota Vios facelift in December.
“Additionally, UMW intends to introduce few new CBU (completely built up) and CKD (completely knocked down) models which include the new Perodua SUV, probably in early next year,” wrote analyst Nursuhaiza Hashim in a company update.
However, the full-year outlook may not be that rosy. According to JF Apex Securities Research, UMW posted a core net profit of RM86.6 mil during 3Q2 FY2020, rebounding from a core net loss of RM79.8 mil in the previous quarter but 14.4% year-on-year (yoy) lower.
During the period under review, the company’s revenue soared 74.1% quarter-on-quarter but depleted 7.7% yoy to RM2.7 bil.
As for 9M FY2020, the group registered a core net profit of RM37.8 mil which deteriorated 86.2% yoy on the back of a 26.9% yoy slip in revenue.
All-in, JF Apex Securities Research maintained its “hold” rating on UMW with a lower target price of RM2.38 (RM2.40 previously) following a cut in the company’s projected earnings for FY2020F and FY2021F by 24% and 2.2% respectively.
“We are neutral on its (UMW) outlook as (i) the auto division is dampened by stiff competition from other car makers; (ii) stringent loan approval and weak sentiment towards big ticket items amid the COVID-19 pandemic; (iii) higher depreciation cost from its Bukit Raja plant; and (iv) fluctuation of foreign exchange (ringgit against yen and greenback).
Hong Leong Investment Bank (HLIB) Research also maintained a “hold” stance on UMW with a target price of RM2.75 based on unchanged discount of 10% to sum-of-parts of RM3.03.
“We believe Toyota will continue to face stiff market competition in 2021, post ending of the SST (sales and service tax) exemptions, while the recovery of equipment and aerospace manufacturing will be relatively weak,” projected analyst Daniel Wong.
At 10.25am, UMW was up eight sen or 2.99% at RM2.76 with 662,300 shares traded, thus valuing the company at RM3.22 bil. – Nov 26, 2020
