KUALA LUMPUR: Affin Hwang Capital Research has reiterated its Hold rating on UMW Holdings Bhd
with a higher price target of RM5.08.
The research firm is positive on UMW's diverstment of its O&G business with active negotiations ongoing for some of it remaining 14 unlisted O&G assets.
It notes that pretax losses from O&G assets have narrowed to RM35.6mil in 3Q17, fro RM70.6mil ni 2Q17.
Affin Hwang Research also expects UMW's automotive segment to perform better in FY18 due to new model launches and the strengthening of the ringgit against the USD.
"We like Perodua’s award winning MyVi. With strong bookings of 28,000units (since its launch in Nov17), MyVi should lift Perodua’s 2018-19 sales volume.
"Elsewhere, we are cautiously optimistic on Toyota’s 2018 sales prospects - their new model line up (CH-R, Rush, Camry, Harrier, Vios) looks exciting but their relatively high price points (CH-R, Camry, Harrier) may weigh on demand,"
However, it believes prospects for heavy and industrial equipment should remain soft in view of the continued slowdown of activities in key sectors ad intense competition from Chinese-produced heavy equipment and change in regulations in Myanmar.
"We are positive on the recently announced partnership with Komatsu, which should help expand UMWH’s products offering. That said, we expect near-term earnings contribution to be minimal."
It added that UMW has delivered its first fan case in November 2017, and expects the aerospace unit to break even by 2019 and hit full production capacity of 250 fans by 2021.
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