Having trumped consensus’ earnings forecast by 11%, UMW is on track to hit our FY12 estimated profit of RM1bn, which is the highest on the street. All divisions saw stronger earnings, with the oil and gas segment making a notable turnaround despite zero revenue from the Naga 1. We are upgrading our FY12-FY14 earnings estimates by 5%-6% on higher auto margin assumptions and better-than-expectednumbers from the O&G and equipment units. Maintain BUY, with a revised RM12.45 FV, offering a 29% potential upside.
Trumping street estimates. UMW again chalked up record earnings, with 3Q core net profit jumping 57% y-o-y and 3% q-o-q on revenueof RM3.96bn (+25% y-o-y, -4% q-o-q). Its 9MFY12 earnings of RM739.7m (YTD: 41%), which beat consensus forecast by 11% when annualised, are on track to hit our lofty forecast of earnings exceeding RM1bn. The strong earnings boosted the group’s dividend payout for 3Q, for which it has declared a 15 sen dividend per share (9MFY12: 25 sen).
Autos, equipment stand strong. The strong 3Q results were largely attributed to the 17% and 108% y-o-y growth in auto and equipment earnings respectively, as well as a turnaround in the O&G segment, registering a RM42.5m profit YTD vs a RM35m loss for 9MFY11. The auto division benefited from the 6% y-o-y growth in vehicle numbers in 3Q, albeit this was seasonally weaker q-o-q. Meanwhile, Perodua’s 3Q earnings may have surged 41% y-o-y, backed by a 45.9% growth in vehicle sales (based on MBM Resources’ numbers), likely the result of normalisation with regard to the new lending guidelines and improved exports. The equipment unit continued to see robust heavy equipment orders, thanks to the growing construction sector, as well as jade mining activities in Myanmar. The manufacturing division’s PBT improved due to a higher utilisation rate at UMW’s lubricant and automotive plants in China and India respectively.
O&G swings back to the black. UMW’s O&G division recorded earnings of RM19.4m vs a loss of 16.9m in 3QFY11 (9MFY12: RM42.5m). Its 3Q revenue grew 14.3% y-o-y, boosted by higher charter rates and revenue contribution from its rigs despite zero revenue from the dry docking of the Naga 1. Naga 1 is expected to be operational in December, which should slightly improve the company’s 4Q earnings.
Upgrade earnings. Maintain BUY. We upgrade our FY12-FY14 earnings by 5%-6% based on our higher auto margin assumptions and better-than-expected numbers from UMW’s O&G and equipment units. Our FV is revised higher to RM12.45, based on sum-of-parts. Maintain BUY. We are switching our top pick to UMW from Tan Chong in view of the former’s O&G turnaround. Similarly, we expect consensus to upgrade their earnings forecasts in view of the better-than-expected results.
Trumping street estimates. UMW again chalked up record earnings, with 3Q core net profit jumping 57% y-o-y and 3% q-o-q on revenueof RM3.96bn (+25% y-o-y, -4% q-o-q). Its 9MFY12 earnings of RM739.7m (YTD: 41%), which beat consensus forecast by 11% when annualised, are on track to hit our lofty forecast of earnings exceeding RM1bn. The strong earnings boosted the group’s dividend payout for 3Q, for which it has declared a 15 sen dividend per share (9MFY12: 25 sen).
Autos, equipment stand strong. The strong 3Q results were largely attributed to the 17% and 108% y-o-y growth in auto and equipment earnings respectively, as well as a turnaround in the O&G segment, registering a RM42.5m profit YTD vs a RM35m loss for 9MFY11. The auto division benefited from the 6% y-o-y growth in vehicle numbers in 3Q, albeit this was seasonally weaker q-o-q. Meanwhile, Perodua’s 3Q earnings may have surged 41% y-o-y, backed by a 45.9% growth in vehicle sales (based on MBM Resources’ numbers), likely the result of normalisation with regard to the new lending guidelines and improved exports. The equipment unit continued to see robust heavy equipment orders, thanks to the growing construction sector, as well as jade mining activities in Myanmar. The manufacturing division’s PBT improved due to a higher utilisation rate at UMW’s lubricant and automotive plants in China and India respectively.
O&G swings back to the black. UMW’s O&G division recorded earnings of RM19.4m vs a loss of 16.9m in 3QFY11 (9MFY12: RM42.5m). Its 3Q revenue grew 14.3% y-o-y, boosted by higher charter rates and revenue contribution from its rigs despite zero revenue from the dry docking of the Naga 1. Naga 1 is expected to be operational in December, which should slightly improve the company’s 4Q earnings.
Upgrade earnings. Maintain BUY. We upgrade our FY12-FY14 earnings by 5%-6% based on our higher auto margin assumptions and better-than-expected numbers from UMW’s O&G and equipment units. Our FV is revised higher to RM12.45, based on sum-of-parts. Maintain BUY. We are switching our top pick to UMW from Tan Chong in view of the former’s O&G turnaround. Similarly, we expect consensus to upgrade their earnings forecasts in view of the better-than-expected results.
Source: OSK
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