• UMW Holdings Bhd (UMW) said it had disposed of its remaining stake (70%) in UMW Fabritech Sdn Bhd for RM18mil in cash.

• The Malaysia-based unit is presently dormant and had provided services to the oil and gas sector (sandblasting, priming, coating, inspection, maintenance and repair).

• It was sold to DKLS Luxuria Sdn Bhd which held the other 30%. We understand the value of the unit is tied to a piece of land in Lumut, Perak.

• The move is in line with the group's plan to divest its remaining O&G assets following the demerger of UMW O&G in June.

• We make no changes to our earnings projections given the immateriality of the unit and the small transaction size.

• The group had resolved to dispose of 16 assets that have dented its bottomline significantly in the past. It aims to dispose of most of these (12 of 16) by the yearend. It has received offers and is in final negotiations for certain assets. Operational losses from this segment (unlisted O&G) will continue although the quantum should reduce over time. It saw a net loss of RM71mil in 1H17 largely due to the cessation of drilling operations in Oman.

• We maintain HOLD on UMW Holdings (UMW) with an SOP-based fair value of RM5.20. We are assured that the group appears to be concise with its key actions it needs to take to improve its core segments.The immediate goals for UMW would be to fortify the positions of its core segments and dispose of the remaining O&G assets. FY18 would be an especially precarious year as it works to set a stronger foundation while counting on a more stable external environment.

Source: AmInvest Research - 6 Oct 2017