What’s new

• UMW Holdings Berhad (UMW) announced that its proposal to acquire 50.07% equity interest in MBM Resources Bhd (MBMR) has been rejected by MBMR’s shareholder.

• Med-Bumikar Mara Sdn Bhd and it’s a wholly-owned subsidiary Central Shore Sdn Bhd (CSSB) have separately rejected the conditional offer made by UMW.

• In conjunction to that, UMW extends the offer period from 28 March to 30 April as the Group reckons that the offer price deemed reasonable and at a premium to the current traded share price. Besides, the Board also intends to continue to engage with its shareholders and key principals.

• In addition, the Group stresses out that the proposed acquisition of Perodua from PNB Equity Resource Corporation Sdn Bhd (PERC) is not conditional upon the stake purchase in MBMR.

Comment

• Extension of offer period but with an unchanged offer price. The Group has extended the timeline for the proposed acquisition of 50.07% equity interest in MBMR with an unchanged offer price of RM2.56/share. We believe the extension of offer period made by the Group is to have more time to negotiate with MBMR’s shareholders regarding the takeover offer. We also believe that the Group will increase its stake in Perodua to strengthen its auto segment by gaining significant control over Perodua.

• Transformation plan still intact. Looking forward, we expect the Group to re-focus on three core businesses which will resume its positive growth momentum over the longer term. Auto division is expected to register robust growth following increase in its stake in Perodua and completion of new plant in Bukit Raja in 2019 (initial 50K capacity p.a.) which will further boost its Toyota sales volume. M&E division is expected to move towards into high value-added manufacturing banking on aerospace venture, while, exit of O&G segment by 2018 will help to improve the Group’s overall profitability.

Earnings Outlook/Revision

• We maintain our earnings forecasts for FY18F and FY19F pending the finalization of the proposed acquisition.

Source: JF Apex Securities Research - 27 Mar 2018