Review

• UMW Holdings Bhd’s (UMW) 2QFY23 results came in above expectations. Excluding the gain from disposal of Serendah land amounted to RM177mn and all exceptional items, the group’s core net profit increased 16.4% to RM120.9mn on the back of a 20.2% increase in revenue.

• Cumulatively, 1HFY23 core net profit increased to RM264.4mn (+23.7% YoY) in tandem with the 20.1% increase in revenue.

• Automotive: 1HFY23 PBT increased 5.2% YoY to RM429.9mn due to higher number of vehicles sold. Toyota and Lexus sold 48.7k units for 1HFY23 (+6.0% YoY). Meanwhile, UMW’s 38% associate, Perodua also recorded an increase in car sales volume of 13.6% YoY to 144.7k units.

• Equipment: 1HFY23 PBT increased 49.4% YoY to RM100.4mn on the back of 20.7% growth in revenue. The improvement was premised on higher delivery of equipment from both Heavy Equipment and Industrial Equipment sub-segments in 1HFY23.

• Manufacturing & Engineering (M&E): 1HFY23 PBT surged 86.6% YoY to RM44.2mn, driven by higher contribution from all sub-segments, including the Aerospace sub-segment due to higher delivery of fan cases.

• No dividend was declared for the quarter under review.

Impact

• We tweak FY23 - FY25 earnings upward by 1.1% - 26.2% after factoring in higher profit from the automotive division and contributions from associates.

Outlook:

• Management still maintains a sales target of 93k units for FY23 (-8.0% YoY). The current outstanding booking for UMW Toyota Motor (UMWT) stood at approximately 40k units while Perodua still has around 200k outstanding bookings. Vios, Corolla Cross and Hilux were the bestselling models in 1H with 61% of combined sales.

• Management expects the equipment segment outlook to remain positive underpinned by higher demand as a result of resumed infrastructure and construction projects.

• Meanwhile, we believe the recent proposed acquisition of a 61.2% stake in UMW by Sime Darby Bhd (SIME) (see sector report dated 25th Aug) may face some hurdles given the complexity of the automotive ecosystem.

Valuation

• Our TP for UMW is benchmarked to the general offer price of RM5.00/share offered by SIME. We advise shareholders to accept the offer.

Source: TA Research - 30 Aug 2023