UMW Holdings may need to pay about RM1.12bil in cash and issue 49.3 million new shares at RM6.09 a share to privatise MBM and acquire the additional 10% stake in Perodua from PNB Equity Resources.
KUALA LUMPUR: CIMB Equities Research retained its forecasts, Hold rating and target price of RM6.36 for UMW Holdings Bhd
based on 14 times CY20F P/E, in line with its historical five-year mean.
It said on Tuesday higher automotive earnings, narrowing aerospace losses, and stronger ringgit are potential upside risks to our call. Weakening ringgit and delays in new model launches are key downside risks.
CIMB Research issued the report following a site visit for 18 sell-side analysts to UMW-ToyotaAssembly Services Sdn Bhd's (ASSB) Bukit Raja plant (BRP), in Klang, Selangor.
The visit started with a presentation on ASSB’s background, followed by a plant tour across its three main processes, namely welding, painting and assembly. BRP started commission in early-Jan 2019 following the roll out of the new Vios.
UMW Toyota Motor invested RM1.8bil over 2016-2018 on land acquisition, construction and production equipment for BRP.
BRP is designed to handle production of up to 100,000 units p.a. but currently has an estimated annual production capacity of 50,000, which is higher than the group's older Shah Alam plant running at 38,000 units production capacity. The BRP is capable of producing B- and C-segment vehicles under Toyota.
“We were impressed with the high level of automation at BRP, especially for the welding and painting processes, which require minimal human intervention. For example, the plant has 61 robots to run a welding line for underbody and side panel spots, which help to reduce the line's manual labour workload by 33%.
“The completed body will then be transported to the paint shop via an automated guided vehicle. Overall, ASSB has raise its total production automation level from 30% to 70% with the commissioning of BRP,” it said.
CIMB Research said UMW indicated plans to assemble a new B-segment model in April.
UMW does not rule out the possibility of adding new complete-knocked down (CKD) models in the near future depending on domestic demand.
The new plant also helped to raise the content localisation for Vios from 58% in the previous generation to 80% in the latest model, driven by Toyota's shared engine platform.
Higher content localisation will allow the group to enjoy lower excise duties, which in turn enables it to offer competitive pricing.
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