New Toyota models to drive UMW earnings

PETALING JAYA: UMW Holdings Bhd is expected to see positive earnings growth in 2019, driven by the launch of new Toyota models and strong sales of Perodua vehicles.

In a report yesterday, CGSCIMB said UMW expects to deliver sales volume of 75,000 units in 2019, which is equivalent to a 12.7% year-on-year increase.

It said the company will be launching the new Toyota Vios, Hilux, C-HR and Rush, adding that it will also be introducing the Yaris, which is a new B-segment model.

“Meanwhile, we expect another strong year for Perodua in 2019, driven by the new Aruz sport-utility vehicle and Myvi. Aruz received 5,700 bookings in the first three weeks of 2019. 

Overall, Perodua targets sales of 231,000 units in 2019.”

UMW, via UMW Corp Sdn Bhd, has a 38% stake in Perodua.

In spite of the attractive growth prospects, CGS CIMB said UMW will be impacted by depreciation expense from its Bukit Raja plant and higher coupon payment related to its RM1.1bil perpetual sukuk issued in April 2018.

“The group recognised RM35.4mil coupon payment in the fourth quarter of 2018. UMW will incur RM70mil annual coupon payment for the sukuk in 2019.

UMW returned to the black in its financial year ended Dec 31, 2018, registering a net profit of RM341.66mil compared with a net loss of RM640.61mil in the previous corresponding period, due to improved performance in three core segments and the reversal of provisions that weighed down its previous year’s earnings.

Revenue meanwhile increased to RM11.31bil from RM11.07bil.

CGSCIMB said Toyota sales volume in the fourth quarter of 2018 slid 38% quarter-on-quarter.

“In addition, UMW also stop production of passenger cars at its Shah Alam plant in November and December as the group was in the midst of transferring operations to the new plant in Bukit Raja. 

“The group also declared 2.5 sen final dividend per share in the fourth quarter of 2018, below our expectation of 10 sen.”

The research house added that automotive revenue fell by 0.3% year-on-year, partly due to lower sales volume from Toyota.

“However, UMW benefited from a favourable foreign exchange movement and stronger demand following the “tax holiday” period in June to August last year. 

Overall, UMW’s core net profit surged from RM316mil in 2017 to RM510mil in 2018.”

“We maintain our ‘hold’ rating with a higher RM6.36 target price, still based on 14-times 2020 price-to-earnings ratio, in line with its historical mean.”
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