Period  1Q14

Actual vs. Expectations Within expectations. The group reported 1Q14 normalised PATAMI of RM211.8m which made up 22% and 23% of our full-year forecast and consensus full year estimates, respectively.

 Note that the 1Q14 normalised PATAMI has been adjusted by excluding the non-core items totalling RM23.7m comprising of: (i) RM0.8m of gain on disposal of properties, (ii) RM2.1m of reversal of investment, (iii)RM8.5m of derivatives gain, (iv) RM7.5m of gain on forex as well as others immaterial non-core items amounting to RM4.8m.

Dividends  As expected, no dividend was declared under the quarter reviewed.

Key Result Highlights YoY, 1Q14 revenue increased by 7% due to higher revenue contributions across the Automotive and Oil & Gas segments. Meanwhile at the EBIT level, margin improved marginally by 0.3ppts to record at 12.1% helped by better Oil & Gas profitability.

 QoQ, 1Q14 revenue declined by 2% as the marginal growth of 1% in Automotive segment was negated by lower revenue in Oil & Gas and other segments. As a result, normalised PATAMI was lower at RM211.8m.

 YoY, Automotive: 1Q14 revenue increased by 11% due to the higher overall Toyota vehicles sales (+16.7%) which was mainly driven by the overwhelming responses for its newly launched Vios and Corolla Altis. Meanwhile at the PBT level, margin remained stable with PBT recording the same quantum of growth.

 YoY, Equipment: 1Q14 revenue lower by 9%, dragged down by the continued drop in commodity prices in Papua New Guinea and the continued suspension of mining activities in Myanmar. Coupled with the lower operational efficiency, PBT decreased by 34%.

 YoY, Oil & gas: 1Q14 revenue recorded a decent growth of 24% on the back of: (i) full contribution from NAGA 4 which commenced operations on April 2013, (ii) higher daily operating rates for NAGA 2 and (iii) higher operating days for NAGA 1. Of noteworthy, PBT nearly doubled to RM58.3m with the gains of investment income from placement of the IPO proceeds.

 YoY, M&E: 1Q14 revenue increased by 3% due to the higher overall demand in the lubricants and automotive business as well as the better sales from its subsidiaries in India. As a result, PBT also improved by 3%.

Outlook  For FY14, the group has forecasted the combined total sales from UMW Toyota Motor (98.4k units, +8%) and Perodua (197k, +1%) to achieve 295.4k units (+3%), a quantum which is shared by us. Note that our total sales assumption for Toyota is c.97.9k (or +7.3%) annually of which 30% will be from Vios while our total sales assumption for Perodua is at 198k (or +1%). Despite a higher sales forecast, we are expecting margin to decline in view of the cost push inflationary factor as well as the stiff competition, particularly in B & C segments.

Source: Kenanga