UMW earnings to improve past 2Q20

KUALA LUMPUR: Looking past expectations of a weaker 2Q20, UMW Holdings Bhd anticipates a rebound in earnings on cheaper car prices from the tax incentive and an attractive product pipeline.

According to Affin Hwang Capital research, the Toyota RAV4 will be launched this month while two new CKD models are slated for launch in 2H20.

The research house, which has a "buy" call on the counter, maintained its earnings foreasts and target price of RM4.10.

"At 12x 2021E PER, we believe valuation is attractive, in view of the new volume-generative Toyota model line-ups, modest

growth from UMWH’s two core segments, and higher Perodua associate contribution," it said.

The research house said the automotive distributor is expected to experience sequentially weaker earnings in 2Q owing to the extension of the movement control order (MCO) in April and May.

In a results briefing, UMW Toyota had revised its 2020 sales target to 45,000 units, which is 36% lower year-on-year (y-o-y). Perodua meanwhile is expected to announce its 2020 target soon.

In 1Q, core net profit fell 44% y-o-y to RM49mil owing to the MCO. Revenue for the quarter dropped 24% y-o-y to RM2.12bil on lower sales in the automotive and equipment segments, partially offset by a better performance from the M&E segment.

Associate contribution dove 52% y-o-y to RM29mil due to a 26% decline in Perodua sales volume.

The results were in line with Affin Hwang's and market expectations at 26% and 24% of their respective full-year estimates.

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