KUALA LUMPUR: UMW Holdings Bhd's 3Q18 results are likely to show improvement over the preceding quarter with revenue and net profit benefiting from higher Toyota/Lexus sales.
It upgraded its call on the counter to buy from neutral as value has re-emerged after the recent share price correctin. It maintained its target price at RM5.59.
RHB Investment Research said its estimates revenue and net profit at RM3.1bil and RM95mil, imploying a net profit growth of 20% q-o-q.
It attributed this improvement to the higher sales volumes boosted by the tax free window, despite a drop in Perodua sales.
It added that the autoparts business should also benefit from the spike in demand, although it is expecte to be offset by production disruptions of the Perodua Myvi.
RHB expects auto sales to be softer for the remaining quarter as year-end sales are likely to be more subdued on lower industry stock levels.
However, the commissioning of UMW’s new assembly facility early next year will be a positive medium-term driver, enabling Toyota to offer more locally-assembled product variants.
"We expect more new model launches in the coming months," said RHB.
With regards to UMW's proposed aquisition of 50.7% in MBM Resources, which expires on Oct 31, the research house said it is unlikely to succeed due to reported dissention by major shareholder Daihatsu.
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