UMW (4588) - UMW Holdings - Needs more gas
Target RM12.03 (Stock Rating: HOLD)
UMW’s FY14 core net earnings came in below expectations, accounting for 80% of our full-year forecast and 86% of consensus. As expected, an interim dividend of 16 sen per share was declared. The compression of profit margins at the group’s auto division due to intense competition and the weakening RM against the US$ as well as the higher-than-expected losses at its ‘others’ segment were the main culprits. Nonetheless, we make no changes to our FY15-16 EPS forecasts given the improving outlook at its equipment division and its associate Perodua. We also introduce our FY17 EPS forecast. We maintain our RNAV-based target price and Hold call. Switch to Berjaya Auto, which is our top pick for the sector.
Auto division riding on Toyota
UMW’s core net earnings grew 14.9% yoy to RM749.9m, driven by a 7.2% yoy increase in revenue to RM15.0bn. The auto division’s pretax earnings grew 4.3% yoy to RM1.5bn, with revenue growing 5.0% yoy to RM10.8bn. In terms of sales, 2014 was a satisfactory year for Toyota, with its sales volume growing 12.4% yoy to 102,035 units, leading to a 1.4%-pt increase in its market share to 15.5%. However, the intense competition, which led to aggressive price discounting, and the weakening RM against the US$, which led to a hike in cost of sales for its imported CKD parts and CBU models, affected profitability.
Strong growth in the equipment and O&G segments
The equipment segment’s pretax earnings rose 13.7% yoy to RM217.3m in FY14, due mainly to improved sales in the industrial equipment segment, especially in the overseas operations. The lifting of suspension on the mining activities in Myanmar in September 2014 further contributed to the higher revenue. The oil & gas segment was the strongest-growing division in FY14, with pretax earnings jumping 39.3% yoy to RM286.2m. This was attributed mainly to the higher daily operating rates for NAGA2 and NAGA3 and full-year contribution from NAGA4, which commenced operations in April 2013.
Turnaround at the manufacturing & engineering segment
After recording losses in FY13, things turned around at the manufacturing and engineering division, which posted pre-tax earnings of RM15.7m on the back of an improved operating margin from its lubricant business in China.
Source: CIMB Daybreak - 27 February 2015
Target RM12.03 (Stock Rating: HOLD)
UMW’s FY14 core net earnings came in below expectations, accounting for 80% of our full-year forecast and 86% of consensus. As expected, an interim dividend of 16 sen per share was declared. The compression of profit margins at the group’s auto division due to intense competition and the weakening RM against the US$ as well as the higher-than-expected losses at its ‘others’ segment were the main culprits. Nonetheless, we make no changes to our FY15-16 EPS forecasts given the improving outlook at its equipment division and its associate Perodua. We also introduce our FY17 EPS forecast. We maintain our RNAV-based target price and Hold call. Switch to Berjaya Auto, which is our top pick for the sector.
Auto division riding on Toyota
UMW’s core net earnings grew 14.9% yoy to RM749.9m, driven by a 7.2% yoy increase in revenue to RM15.0bn. The auto division’s pretax earnings grew 4.3% yoy to RM1.5bn, with revenue growing 5.0% yoy to RM10.8bn. In terms of sales, 2014 was a satisfactory year for Toyota, with its sales volume growing 12.4% yoy to 102,035 units, leading to a 1.4%-pt increase in its market share to 15.5%. However, the intense competition, which led to aggressive price discounting, and the weakening RM against the US$, which led to a hike in cost of sales for its imported CKD parts and CBU models, affected profitability.
Strong growth in the equipment and O&G segments
The equipment segment’s pretax earnings rose 13.7% yoy to RM217.3m in FY14, due mainly to improved sales in the industrial equipment segment, especially in the overseas operations. The lifting of suspension on the mining activities in Myanmar in September 2014 further contributed to the higher revenue. The oil & gas segment was the strongest-growing division in FY14, with pretax earnings jumping 39.3% yoy to RM286.2m. This was attributed mainly to the higher daily operating rates for NAGA2 and NAGA3 and full-year contribution from NAGA4, which commenced operations in April 2013.
Turnaround at the manufacturing & engineering segment
After recording losses in FY13, things turned around at the manufacturing and engineering division, which posted pre-tax earnings of RM15.7m on the back of an improved operating margin from its lubricant business in China.
Source: CIMB Daybreak - 27 February 2015
