UMW’s 1QFY12 core earnings came in line with our and
consensus expectations, thanks to positive profit growth from autos, equipments
and oil & gas division, though manufacturing only broke even due to
start-up losses. Management remains positive on the outlook and we expect
earnings from the remaining quarters to be strong on the back of higher vehicle
sales, with the new Camry to be unveiled in June, and strong earnings momentum
from oil & gas. We are upgrading our forecasts by 6% and 10% for FY12 and
FY13 respectively. This consequently lifts our FV on UMW to RM9.55, reaffirming
our BUY call since Feb.
Boosted by autos and
equipments. UMW’s 1QFY12 core
earnings came in at RM185.2m, down 12.6% q-o-q, due to seasonality as vehicle
sales declined by 3.5% but higher by 12% y-o-y, thanks to the to the
higher combined sales (y-o-y: 14.7%. q-o-q: 6.3%) of
both autos and equipments.
Accounting for 22% and 24% of our
and consensus full-year forecasts, 1QFY12 earnings are deemed in line
and the same goes for revenue. Autos and
equipments were the key
profit contributors as the former benefited from higher
localization (notably from Perodua’s new
Myvi) and the latter seeing more
orders from Myanmar and the rescheduling of deliveries from 4QFY11.
Oil and gas yet to
make a comeback and manufacturing breaks even. Even with the sizeable
reversal of impairments for the oil and gas division,
it has yet to make a significant
return to profitability due to
continued losses by some of its
associates. For 1Q, the division reported earnings of RM24m and a core net
profit of RM5.18m due to some lumpy reversals estimated at RM18m. However, on
the positive note, earnings for the ensuing quarters would likely be stronger,
given the 15% charter rate hike for its Naga 3 drilling rig and narrowing
losses from its associates. The manufacturing division broke even, thanks to
the higher utilization rate achieved by
its overseas start-up part business
units, although the top-line was weaker on the back of lower ASPs owing to the change
in power steering from hydraulic to electric for Perodua’s new Myvi model.
Margins flattish. While
its auto division achieved
improved efficiency, the overall EBITDA
margin came in flat y-o-y as it was
weighed down by the lower-than-expected earnings from its oil and gas division.
Upgrade earnings and
FV. Despite earnings coming just in-line, we are upgrading our forecasts by
6% and 10% for FY12 and FY13
respectively on the back of a
revenue increase of 1.5% for 2012 (0% for 2013). This is due to
stronger-than-expected sales coming from its equipment side and improved margin
for its auto business. Following the adjustment in earnings, we lift our FV on
UMW to RM9.55 (27% potential upside inclusive of its net dividend yield of
5%). We reaffirm our BUY call on UMW.
Source: OSK
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