Period     1QFY13

Actual vs. Expectations     The reported 1QFY13 net profit of RM220m (-0.2% yoy; +5.8% qoq) came in at 20-21% of ours and the consensus full-year net profit forecast. Excluding unrealised fair value and foreign exchange loss of RM19.5m, the core 1QFY13 net profit came in within our expectation at 23% of our estimate. 

Dividends    No dividend was declared in the quarter. 

Key Results Highlights   YoY, the  1QFY13 revenue dropped 9.2% to RM3.4b due to lower contributions across the board. The 1QFY13 PBT fell 0.9% to RM432.7m partly impacted by the unrealised fair value and foreign exchange loss of RM19.5m compared to a gain of RM20.5m in 1QFY12.

YoY – Automotive:  Motor sales volume was 10.7% lower YoY due to the intense competition from new models launched by competitors and the strong promotions and sales in 4Q12 in conjunction with UMW Toyota’s 30th anniversary celebrations. The sale of Perodua vehicles fell 2.0% YoY in 1QFY13. This brought the 1QFY13 PBT to RM368.1m or 0.7% lower YoY due to higher selling and distribution expenses.

YoY – Equipment:  The 1QFY13 revenue declined by 22.0% mainly due to lower demand from Myanmar but compensated by the higher parts sales in Niugini. Despite the lower revenue, the profit before taxation of the Equipment segment increased 9.2% to RM59.1m driven by improvement in Niugini and lower operating expenses.  Its overall market share increased to 35% in 1Q13 but due to the soft and uncertain market conditions resulting from the recently concluded GE13, the overall market size of the industry has shrunk.

YoY – Oil and gas:  The 1QFY13 revenue and PBT fell 35.3% and 45.5% respectively due to: 1) just 72 operating days of NAGA 1 compared to the full quarter operation in the first quarter of 2012 of 91 days due to a refurbishment exercise and 2) a lower revenue from the trading of oilfield products and services.

YoY – M&E:  The 1Q13 revenue increased by 3.3% due to higher demand in the lubricants and automotive business and higher exports achieved for the 4-wheel REM export market. The PBT here rose sharply by >100%. Its operating companies in Malaysia fared better in 1Q13 than 4Q12, backed by the improved overall demand in the lubricant market.

Outlook    We expect UMW Toyota and Perodua to retain their leaderships in the non-national and national passenger car segments respectively.

The performance of the Oil & Gas segment is expected to continue to improve in the subsequent quarters following full contribution from the refurbished NAGA 1, a higher daily operating rate for NAGA 2, continuing contracts for NAGA 3 and the additional contribution from the new NAGA 4.

Change to Forecasts    Our FY13-14 estimates are unchanged.   

Rating  Maintain MARKET PERFORM

Valuation     Our target price of RM14.07 is based on 14x FY14 EPS. 

Risks    Lower than expected vehicle sales.

Source: Kenanga