Due to be released by this month-end, its 4QFY19 CNP is expected to come in between RM120m and RM150m, bringing FY19 CNP to between RM397.3m to RM427.3m (+5% to +13% YoY), which are above our full-year estimate by 6% to 14%. We sense the strong finish was due to better than expected car sales in the 4Q from the usual year-end promotion push with sales mix skewing towards better margin products from all-new Vios and Yaris. BUY with a TP at RM5.45 based on 14x FY20E EPS. We like the stock for its: (i) stream of all-new models (especially Vios, and Yaris) with better margins, and (ii) its deep value stake in 38%-owned Perodua.

We expect stronger than expected UMW Toyota Motor’s sales of 22,258 units (+36% QoQ, +72% YoY), with unchanged FY19 TIV market share of 11% (FY18: 11%). Note that, for FY19, UMW Toyota Motor sales were at 70,009 units (+7% YoY) below its year-end target of 72k.

We expect better margin from cost savings derived from higher localisation rate in the all-new Vios and Yaris (at 80%, compared to previous generations of 50%) as well as less discounting promotion for the outgoing-models to cushion the new Bukit Raja plant’s depreciation cost (estimated at RM60m to RM70m/year, for 30 years) started in 1QFY19.

Despite missing its 2019 target of 72k units, mostly due to delay in new launches, UMW is on track to deliver consensus beating profit in 4QFY19. The model launches in 2019 have paid off well. UMW has launched Toyota Vios (RM78k-RM88k) on 24th January 2019, Toyota Yaris (RM72k-RM84k) on 19th April 2019, A90 Toyota GR Supra (RM568k) on 20th September 2019 and the all-New Toyota Corolla Altis (RM129k-RM137k) on 9th October 2019.

Elsewhere, 38%-owned Perodua is conservatively targeting flat 2020 sales of 240k units, from the all-new MyVi and ARUZ. The 2020 Perodua Bezza has been officially launched in Malaysia, with the carmaker expecting to deliver c.5.6k units in January with average monthly sales of c.4k units. For Equipment division, the group will continue to leverage on its partners (KOMATSU & TICO)’s strengths, while UMW Aerospace is expected to reach breakeven level by FY20.

Source: Rakuten Research - 10 Feb 2020