Review

• UMW Holdings Bhd’s (UMW) 3QFY23 results came in above expectations. The deviation was mainly due to better margins and higher contribution from associates.

• Excluding the disposal gain of Serendah land, which amounted to RM177mn and all exceptional items, the group’s core net profit increased 33.9% to RM161.8mn on the back of a 19.1% increase in revenue.

• Cumulatively, 9MFY23 core net profit increased to RM426.2mn (+27.4% YoY) in tandem with the 19.8% increase in revenue.

• Automotive: 9MFY23 PBT increased 16.1% YoY to RM687.5mn due to a higher number of vehicles sold. Toyota and Lexus sold 76.5k units for 9MFY23 (+6.0% YoY). Meanwhile, UMW’s 38% associate, Perodua, also recorded an increase in car sales volume of 15.9% YoY to 233.2k units.

• Equipment: 9MFY23 PBT increased 33.0% YoY to RM155.9mn on the back of 18.6% growth in revenue. The improvement was premised on higher delivery of equipment from both Heavy Equipment and Industrial Equipment sub-segments in 9MFY23.

• Manufacturing & Engineering (M&E): 9MFY23 PBT surged 88.3% YoY to RM69.8mn, 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 tweaked FY23 - FY25 earnings upward by 4.6% - 15.7% after factoring in higher-than-expected 3Q results, better margins, 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) and Perodua have eased significantly to 34k units and 140k.

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

• Meanwhile, for the Aerospace sub-segment, the higher forecasted orders for fan cases will increase the plant utilisation rate and are expected to contribute positively to this division for the remainder of the year.

• The acquisition by Sime Darby Berhad (SIME) is expected to be completed by the 4Q of this year, and the MGO by the 1Q of 2024. Subsequently, the proposed delisting of UMW will also be taking place.

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 - 28 Nov 2023