UMW Holdings - 4QFY12 in line with expectations

Period  4QFY12/12MFY12

Actual vs. Expectations The FY12 net profit of RM951m was within ours (-2%) and the consensus estimates (+2%).

Dividends  A final DPS of 25 sen was declared for 4Q12, bringing the total DPS for FY12 to 50 sen.

Key Results Highlights  The higher revenue and better associate contribution as well as the turnarounds in the Oil & Gas (O&G) and Manufacturing and Engineering (M&E) divisions led FY12 net profit to almost double YoY to RM951m.

 QoQ, the net profit dropped 31% largely on a higher selling and distribution cost incurred in the quarter and unfavourable USD exchange rates.

 YoY, the 4Q12 net profit of RM208m grew more than two-fold, mainly on contributions from all the business operations (excluding Automotive). Profit contribution from the Automotive division dropped 11% due to a higher selling and distribution costs as well as fluctuations in the USD exchange rate. The softer demand for heavy and industrial equipments and the suspension of some mining activities overseas also pulled down the revenue contribution from the Equipment division by 19%. However, due to a turnaround of an overseas subsidiary, the division actually recorded a profit of RM10m in contrast to a loss of RM37m in 4Q11. Meanwhile, the Oil & Gas division registered PBT of RM4m (4Q11: -RM150m) as its revenue rose and the fair value of the group’s overseas investment went up.

Outlook  We expect UMW Toyota and Perodua to retain their leaderships in the non-national and national passenger car segments respectively.

 The re-rating catalysts would include: (i) a stronger-than-expected vehicle sales, and (ii) the listing of its Oil & Gas unit.

Change to Forecasts  Our FY13-14 estimates are unchanged.

Rating    Maintain MARKET PERFORM.

 We are maintaining our Market Perform rating as the stock only offers a total return of 6% at its current level.

Valuation  Maintaining our target price of RM12.37 based on 14x FY13 EPS.

Risks  Uncertainty from the upcoming General Election may weaken the consumer sentiment.

Source: Kenanga