Investment Highlights

• We maintain our BUY call, net profit forecasts and fair value (FV) of RM4.07 on UMW Holdings based on sum-of parts (SOP) valuation (Exhibit 4), with an FY21F PE of 10x for its motor segment.

• UMWH’s 1QFY21 core net profit of RM87.5mil (predominantly adjusted for reversal of impairment on receivables of RM9.7mil) came in within expectations, at 30% and 28% of our full-year forecasts and full-year consensus estimates respectively. 1QFY21 core net profit surged 95% YoY.

• UMWH registered a 1Q21 revenue of RM3.0bil, which was a 39% YoY increase. The improved performance was largely attributed to: i) higher revenue contribution from the automotive segment bolstered by improved sales volume from both Toyota and Perodua; and ii) higher equipment segment contribution due to improving demand for its products and services in both local and overseas market.

• To recap, Toyota sold 17.0K units in 1Q21 (+63% YoY) vs. 10.4K units in 1Q20. Toyota’s market share in 1Q21 was 12.2%. For the automotive segment, the group registered a stronger 1Q21 revenue of RM2.4bil (+51% YoY) due to higher number of vehicles sold. We believe that this was attributed to: 1) the SST exemption; and 2) Toyota’s aggressive new launches throughout the quarter (Corolla Cross, Innova, Fortuner and Harrier). Hence, the automotive segment’s 1Q21 net profit jumped to RM95.1mil (+88% YoY).

• We also noted a significant improvement in 1Q21 associate earnings to RM87.5mil (+200% YoY) and we suspect that this was due to the stronger performance from Perodua. Perodua sold a total of 57.9K units in 1Q21 vs. 45.0K units in 1Q20 (+29% YoY) and we believe that the increased Perodua sales volume was a result of the SST exemption and the debut of the A-segment Perodua Ativa.

• The M&E division registered a lower 1Q21 revenue and net profit of RM230.3mil (-7% YoY) and RM0.7mil (-89% YoY) respectively. We reckon that this is largely attributed to lower production and deliveries of fan cases due to the impact of the Covid-19 pandemic on the global aviation sector.

Source: AmInvest Research - 25 May 2021