All Shapes and Sizes. Company Update. Price: RM11.08 Target Price: RM By Desmond Chong l

Transcription

1 UMW Holdings All Shapes and Sizes By Desmond Chong l cwchong@kenanga.com.my We came away from the 4Q14 briefing with our NEUTRAL stance unchanged on the mixed outlook guided by management. While the prospect of its Automotive segment appears challenging in light of stiff industry competition as well as the bleak local economic outlook, we see the potential stronger Perodua sales (at associatelevel) to be the saving grace. On the O&G division, while we are cognisant of the headwinds amidst the prevailing low oil prices (thus leading to softening charter rates to rigs players), its healthy orderbook as well as potential future contracts should alleviate concerns on the immediate term. Meanwhile, other divisions should also perform better compared to 2014 with narrower losses following a series of restructuring exercises. With a mixed outlook coupled with the lack of immediate re-rating catalyst, we maintain our MARKET PERFORM rating with an unchanged SoP TP of RM11.00 (which implies a FY14 PER of 14.0x, at its average PER mean). Lower sales target guided for UMW Toyota. Management guided a combined total sales of 304k units from UMW Toyota Motor (96k units) and Perodua (208k units) which are close to our forecasts (UMW Toyota: 98k units and Perodua: 205k units, totalling to 303k units). While the guidance implies a growth of 1.6%, which is generally in line with MAA s 2015 TIV forecast of +2%, sales volume of the group s core earnings contributor, UMW Toyota was forecasted to be lower by 7%. On a similar note, management also sounded more cautious for the prospects in 2015 in view of the stiff industry competition as well as the bleak local economic outlook. While it is also our belief that Toyota could lose ground to its competitors with lack of new attractive models launching in 2015, the saving grace could be the stronger Perodua sales on the back of Perodua Axia and MyVi. On the margin side, while management was reluctant to elaborate on the direction of sales margin, we see margin compression to be the key trend stemming from the fierce competition in the B-segment as well as the higher cost of sales for its imported CKD parts and CBU models. Potential future contracts to be the silver lining for its O&G segment. While the sector is facing headwinds amidst the prevailing low oil prices (thus leading to softening charter rates to rigs players), management noted that the revenues from existing contracts as well as the potential future contracts should cushion shortfalls. We take comfort from management as we understand that the company s outstanding orderbook is still healthy at RM1.8bn (as of Dec14). Although five of UMW O&G rig s contracts (for NAGA 2, 3, 5, 6 and 7) will expired in 2015, we believe the expiration of nine foreignowned rigs in 2015 (out of 16 rigs in Malaysia) should pave the way for the five rigs. Additionally, NAGA-8 which will be taken delivery in Sept 15 should also partly cushion the downside. Note that we have accounted all these in our FY15E UMWOG's NP. Mixed outlook on other divisions. On the Equipment segment, while the outlook remained challenging with commodity prices staying at the current low level, we believe the resumption of mining activities in Myanmar which led to RM200m contracts secured to supply Komatsu equipments to its major customers (Please refer to our report titled: Headway in Myanmar in Aug14 for further details) will mitigate the impact. Touching base on the M&E segment, management believe that the growing lubricant business will mitigate the challenging auto components manufacturing business in Malaysia Meanwhile, other Non-core divisions should post narrower losses following a series of reorganisation and restructuring plans (especially on its Auto component business in India, please refer to the report titled: Exiting Auto-component Industry from India in July14). Our take post 4Q14 briefing. We leave our FY15E and FY16E earnings unchanged as our forecasts are intact at this juncture. Maintain MARKET PERFORM call with SoP-derived TP of RM11.00 (which implies a FY15E PER of 14.0x, at its average PER mean) unchanged. MARKET PERFORM Share Price Performance Price: RM11.08 Target Price: RM11.00 KLCI YTD KLCI chg 3.4% YTD stock price chg 1.1% Stock Information Bloomberg Ticker UMWH MK Equity Market Cap (RM m) 12,944.7 Issued shares 1, week range (H) week range (L) mth avg daily vol: 1,584,187 Free Float 39% Beta 1.0 Major Shareholders SKIM AMANAH SAHAM BU 36.9% EMPLOYEES PROVIDENT 15.8% YAYASAN PELABURAN BU 8.3% Summary Earnings Table FYE Dec (RM m) 2013A 2014E 2015E Turnover EBITDA PBT Net Profit (NP) Core NP Consensus (NP) Earnings Revision (%) EPS (sen) EPS growth (%) DPS (sen) BVPS (RM) PER Price/BV (x) Gearing (%) Dividend Yield (%) PP7004/02/2013(031762) Page 1 of 5

2 SoP valuation of UMW Holdings Sum-of-Parts Valuation of UMW Segment PER (x) FY15 PATAMI Value (RMm) Automotive O&G (Post-listing assumption) Equipment M&E Others Total Total value No of shares Fair value Fwd PER Band Fwd PBV Band Source: Bloomberg, Kenanga Research PP7004/02/2013(031762) Page 2 of 5

3 Income Statement Financial Data & Ratios FY Dec (RM m) 2012A 2013A 2014A 2015E 2016E FY Dec (RM m) 2011A 2012A 2013A 2014E 2015E Revenue 15, , , , ,619.5 Growth EBITDA 2, , , , ,384.7 Turnover Depre. & Amort EBITDA Operating Profit 1, , , , ,843.8 Operating Profit Other Income PBT Interest Exp Adj Net Profit Associate PBT 2, , , , ,104.9 Profitability (%) Taxation EBITDA Margin MI Operating Margin Core Net Profit PBT Margin Core Net Margin Balance Sheet Eff. Tax Rate FY Dec (RM m) 2012A 2013A 2014A 2015E 2016E ROA Fixed Assets 2, , , , ,593.2 ROE Int. Assets Other FA 2, , , , ,221.4 DuPont Analysis Inventories 1, , , , ,805.6 Net Margin (%) Receivables 1, , , , ,323.8 Assets Turnover (x) Other CA Leverage Factor (x) Cash 2, , , , ,589.4 ROE (%) Total Assets 11,495 14,595 16,439 17,035 17,568 Leverage Payables 2, , , , ,107.5 Debt/Asset (x) ST Borrowings 1, , , , ,177.5 Debt/Equity (x) Other ST Liability Net Cash/(Debt) LT Borrowings 1, , , , ,914.2 Other LT Liability Net Assets 6, , , , ,663.4 Valuations Net Debt/Equity (x) Core EPS (sen) Shareholders Equity 4, , , , ,338.4 NDPS (sen) Minority Interest 1, , , , ,325.0 BVPS (RM) Total Equity 6, , , , ,663.4 PER (x) Net Div. Yield (%) Cashflow Statement PBV (x) FY Dec (RM m) 2012A 2013A 2014A 2015E 2016E EV/EBITDA (x) Operating CF 1, , , ,044.2 Investing CF , ,000.0 Financing CF , ,057.8 Change In Cash Free CF , ,044.2 PP7004/02/2013(031762) Page 3 of 5

4 Results Note Malaysian Automotive Peers Comparison NAME 27/02/15 Mkt Cap PER (x) Est. Div. Yld. Hist. ROE Net Profit (RMm) (RM) (RMm) Actual 1 Yr 2 Yr (%) (%) Actual 1 Yr Fwd 2 Yr Fwd (%) (%) (RM) Fwd Fwd DRB-HICOM BHD % 6.3% % 68.6% 2.15 MP MBM RESOURCES BERHAD % 10.0% % 19.8% 3.06 MP TAN CHONG MOTOR HOLDINGS BHD % 2.5% % 52.4% 2.80 UP UMW HOLDINGS BHD % 10.2% % 4.7% MP BERJAYA AUTO BHD % 39.9% % 23.7% 4.29 OP 1 Yr Fwd NP Growth 2 Yr Fwd NP Growth Target Price Rating PP7004/02/2013(031762) Page 4 of 5

5 Stock Ratings are defined as follows: Stock Recommendations OUTPERFORM : A particular stock s Expected Total Return is MORE than 10% (an approximation to the 5-year annualised Total Return of FBMKLCI of 10.2%). MARKET PERFORM : A particular stock s Expected Total Return is WITHIN the range of 3% to 10%. UNDERPERFORM : A particular stock s Expected Total Return is LESS than 3% (an approximation to the 12-month Fixed Deposit Rate of 3.15% as a proxy to Risk-Free Rate). Sector Recommendations*** OVERWEIGHT : A particular sector s Expected Total Return is MORE than 10% (an approximation to the 5-year annualised Total Return of FBMKLCI of 10.2%). NEUTRAL : A particular sector s Expected Total Return is WITHIN the range of 3% to 10%. UNDERWEIGHT : A particular sector s Expected Total Return is LESS than 3% (an approximation to the 12-month Fixed Deposit Rate of 3.15% as a proxy to Risk-Free Rate). ***Sector recommendations are defined based on market capitalisation weighted average expected total return for stocks under our coverage. This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies. Published and printed by: KENANGA INVESTMENT BANK BERHAD (15678-H) 8th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia Telephone: (603) Facsimile: (603) Website: Chan Ken Yew Head of Research PP7004/02/2013(031762) Page 5 of 5