Investment Highlights

• We reiterate our BUY call on UMW Holdings (UMWH) with a higher sum-of-parts (SOP)-derived fair value of RM4.89/share (from RM4.65/share previously). Our FV implies FY23F PE of 13.8x, slightly higher than its 5-year mean. We also retain our neutral 3-star ESG rating.

• We raised UMWH’s FY22F earnings higher by 21% as vehicle sales beat our 2022 forecast at +1,035 units for Toyota and +6,219 units for Perodua.

• Also, we adjusted our FY23F by +6% and FY24F by +5%, in line with our revised Perodua sales target of 265,000 units (+15,000 units) for 2023 and 260,000 units (+5,000 units) for 2024.

• UMW’s 2022 sales volume hit a record-high after UMW Toyota (UMWT) and Perodua reported a combined 383,054 units (+46% YoY) sold during the year. In December 2022, Toyota delivered robust monthly sales of 41,664 units (+7% MoM) whereas Perodua posted 31,224 units (+9% MoM).

• Coming from a low base in 2021 which was mainly affected by the movement restriction implemented from 1 June to 15 August 2021, UMWT and Perodua surpassed their sales target for the year underpinned by the tax-free incentive that was ended on 30 June 2022. Recall that UMWT set a sales volume target of 80,000 units while Perodua aimed for 247,800 units for 2022.

• Toyota sold 101,035 units in 2022, an increase of 40% YoY from 72,394 units in 2021. Based on November 2022 sales data, the marque continues to retain its leadership in the non-national car segment with a market share of 14.1%. Model-wise, the Toyota Vios, Hilux and Corolla Cross remain its best-selling models.

• Meanwhile, Perodua’s 2022 sales grew 48% YoY to 282,019 units from 190,291 units in 2021 as it continues to lead the market with a share of 39% as at November 2022.

• In terms of new launches, UMW Toyota is planning to introduce its second hybrid electric vehicle (HEV) in 2023, alongside a potential battery electric vehicle (BEV). Meanwhile, UMWH indicates that Perodua has a hybrid model in the pipeline for 2024 introduction.

• The group currently trades at a compelling FY23F PE of 10.7x, 16% below its 5-year mean of 12.7x while offering a fair dividend yield of 2.1%.

Source: AmInvest Research - 17 Jan 2023