A commendable feat. UMW's 1HFY12 core earnings of RM414m, which grew by 9% y-o-y, accounted for 41% of our and 48% of consensus estimates. We deem the numbers to be in line. Last year, UMW's 1H earnings accounted for 45% of full year forecasts. In IHFY12, revenue growth was registered across all its divisions, notably autos, equipments and oil and gas (O&G), which saw revenue climbing 19%, 29% and 67% respectively y-o-y. The laggard performer was its manufacturing division, which saw a topline growth of 2.6%, as Proton's lower production capped its upside. Its auto division, which accounts 70% of its topline, was driven by higher vehicle sales (YTD: +22.6%).

O&G disappoints. Sadly, O&G continues to disappoint, reporting a core net loss of RM7m after stripping off the write backs on its impairments and fair value translations.  The losses were largely related to the dry-docking of the NAGA 1 for deep-dish installation (to be back in operations in 4Q) and significant exchange losses suffered by Indian associate USTPL as a result of the major depreciation of the Indian Rupee against the US Dollar. We have scaled back our O&G earnings for FY12f from RM76m to RM40m as a result of this.

Equipment driving bottomline. UMW's equipment division saw a bottomline improvement of 57%, with its 1H earnings breaching our full year forecasts despite revenue coming in line. The stronger earnings were driven by contribution from the high margin O&G segment (for the supply of air compressors) and rental fleets riding on the higher construction and O&G related activities. In addition, sales of parts and services also drove margins. We lift this division's FY12f earnings from RM81m to RM129m.

2H outlook. Autos will still drive earnings, with the new Vios and Hilux facelifts sustaining demand well into 2HFY12. Perodua will also be launching the Alza facelift. O&G is expected to stage a better performance on higher utilization rates from its associates and its work on the GAIT I rig has been income generating since July 2012.