UMW Holdings - Bursa e

Transcription

Initiating Coverage
Initiating Coverage | UMW Holdings | 18 June 2013
(Member of Alliance Bank group)
UMW Holdings
PP7766/03/2013 (032116)
Automotive
18 June 2013
12-month upside potential
Target price
Current price (as at 17 Jun)
Capital upside (%)
Net dividends (%)
Total return (%)
13.60
14.60
-6.8
3.9
-2.9
We initiate coverage on UMW Holdings Berhad (UMW) with a NEUTRAL rating and TP of
RM13.60. While fundamentals have been improving particularly the oil & gas division, we
believe most of the positives have already been priced-in given its strong price
performance over past year. UMW is currently trading at CY13 and CY14 P/E of 16x and
14x, respectively which are at premium to peers. On the other hand, we believe
intensifying competition in the auto sector in the near term may negatively affect UMW’s
automotive segment and offset gains to be made in other segments.
Intensifying competition in the auto sector

Share price performance
1M
Absolute (%)
4.4
Relative (%)
4.1
Bloomberg Ticker: UMWH MK | Bursa Code: 4588
Positives mostly priced-in
Analyst
Angeline Chin
[email protected]
+603 2604 3911
Key stock information
Syariah-compliant?
Market Cap (RM m)
Shares outstanding (m)
Free float (%)
52-week high / low (RM)
3-mth avg volume ('000)
3-mth avg turnover (RM m)
Neutral
Yes
17,057.1
1,168.3
33.5
14.72 / 8.43
2,122.0
29.4
3M
9.8
1.1
6M
23.1
15.3
Share price chart

We believe the local automotive industry has become increasingly more dynamic and
competitive; especially the non-national car segment. Toyota and its two other major
Japan automaker rivals, Honda and Nissan, have been aggressive in their marketing
effort to recapture lost market share from US, European and South Korean marques.
The recent launch of Nissan Almera into the highly competitive B-segment market is
expected to intensify competition in the market, both national and non-national
segment.
NAP review will lead to wait and see by potential car buyers


Another revision of the National Automotive Policy (NAP) is expected to be announced
in 2013 whereby more liberalisation measures may be undertaken.
For the time being, potential car buyers may adopt a wait and see approach in view of
the impending new NAP, which could see the gradual reduction in import tax and excise
duty, in our view.
Unlocking oil & gas value via an IPO



UMW plans to list its oil & gas unit by 4Q this year. The group will divest 39% of its stake
and retain a 61% stake in the soon-to-be listed company, UMW-OG Group.
We believe the listing will unlock the value of its investment in oil & gas assets and the
proceeds could be utilised to pare down borrowings (assuming UMW will undertake
offer for sale).
To note, UMW will recognise a one-off disposal gain from the listing of its O&G division.
That said, earnings contribution would drop due to reduced equity holding post the IPO.
11.5% earnings CAGR over next 3 years

Major shareholders
Permodalan Nasional Berhad
Employees Provident Fund
%
42.5
14.0


We expect UMW to post an 11.5% earnings CAGR over the next 3 years, mainly driven
by its oil & gas division.
The PBT contribution from oil & gas segment will increase by 183%, 57% and 23% in
FY13, FY14 and FY15, respectively.
The earnings growth is mainly supported by (1) new drilling rigs coming on stream i.e.
NAGA 4 in FY13 and NAGA 5 in FY14, and (2) higher charter rate for rigs upon contract
renewal.
Valuation and recommendation



UMW has significantly outperformed the FBMKLCI over the last 12 months. We believe
further share price appreciation is now limited as most positives have been priced-in.
UMW is currently trading at CY13 and CY14 P/E of 16x and 14x, respectively which are at
premium to its peers as well as almost 2 standard deviations above its mean P/E of 12x.
Our sum-of-parts derived target price of RM13.60, implies potential downside risk of 2.9% (after taking into consideration the dividend yield of 3.9%). With that, we rate
UMW as NEUTRAL.
All required disclosure and analyst certification appear on the last two pages of this report. Additional information is available upon
request. Redistribution or reproduction is prohibited without written permission
SNAPSHOT OF FINANCIAL AND VALUATION METRICS
Figure 1 : Key financial data
FYE 31 Dec
Revenue (RM m)
EBITDA (RM m)
EBIT (RM m)
Pretax profit (RM m)
Reported net profit (RM m)
Core net profit (RM m)
EPS (sen)
Core EPS (sen)
Alliance / Consensus (%)
Core EPS growth (%)
P/E (x)
EV/EBITDA (x)
ROE (%)
Net gearing (%)
Net DPS (sen)
Net dividend yield (%)
BV/share (RM)
P/B (x)
FY11
FY12
FY13F
FY14F
FY15F
13,535.8
1,905.4
1,607.8
1,381.5
502.1
836.7
43.0
71.7
15,863.6
2,102.8
1,817.4
2,009.7
994.3
941.9
85.1
80.6
42.1
20.4
9.6
11.8
8.8
31.0
2.1
3.64
4.0
12.4
18.1
8.7
20.5
10.1
50.0
3.4
4.15
3.5
16,372.2
2,288.6
1,978.0
2,143.3
1,097.7
1,097.7
94.0
94.0
101.7
16.5
15.5
8.1
20.7
7.1
56.4
3.9
4.54
3.2
17,269.2
2,473.1
2,128.1
2,330.1
1,213.8
1,213.8
103.9
103.9
103.3
10.6
14.1
7.5
20.9
6.7
62.3
4.3
4.97
2.9
18,066.6
2,608.7
2,234.0
2,490.9
1,306.8
1,306.8
111.9
111.9
105.3
7.7
13.1
7.0
20.6
8.0
67.1
4.6
5.43
2.7
Source: Alliance Research, Bloomberg
Figure 2 : 12-month forward P/E trend
P/E (x)
P/E
Average P/E
Figure 3 : 12-month forward P/B trend
+1/-1 SD
+2/-2 SD
P/BV (x)
P/BV
Average P/BV
+1/-1 SD
+2 / -2 SD
3.5
19
17
3.0
15
2.5
13
11
2.0
9
1.5
7
2
2013
2012
2011
2009
2010
1.0
2013
2012
2011
2010
2009
5
Figure 4 : Peer comparison
Local
Target
Currency price
Company
Call
Malaysia
UMW Holdings
Tan Chong Motors
DRB-Hicom
Neutral RM
NR
RM
NR
RM
13.60
NR
NR
Share
price
EPS Growth
Net Dividend
Mkt Cap
(%)
P/E (x)
P/BV (x)
ROE (%)
Yield (%)
(USD m) CY13 CY14 CY13 CY14 CY13 CY14 CY13 CY14 CY13 CY14
14.60
6.71
2.76
17,057.1
4,380.4
5,335.7
16.5
109.5
-69.5
10.6
16.2
12.6
15.5
13.2
11.5
14.1
11.4
10.2
3.2
2.0
0.7
2.9 20.7 20.9
1.8 16.6 16.9
0.7 5.9 7.1
3.9
2.2
1.9
4.3
2.4
2.2
14.6
11.9
14.4
12.9
2.5
2.3 17.1 17.5
3.2
3.6
25,507.3
15,262.5
12,680.5
6,564.1
11.9
24.5
7.6
21.7
12.0
16.1
7.4
17.0
6.7
11.3
7.9
11.1
6.0
9.7
7.4
9.5
1.1
3.0
1.2
1.4
1.0
2.5
1.1
1.2
16.9
27.5
15.2
13.9
3.9
2.4
1.8
1.4
4.3
2.8
2.0
1.5
5,615.4
28.6
22.2
11.6
9.5
2.7
2.1 25.4 24.2
0.4
0.5
7,974.0
3,880.9
2,144.7
2,043.3
1,190.5
1,441.0
116.7
11.9
67.9
120.7
56.6
350.0
44.6
17.6
37.6
33.3
33.3
51.1
16.2
9.5
10.5
9.2
7.7
17.8
11.2
8.1
7.6
6.9
5.8
11.8
1.2
1.6
1.5
2.4
1.0
0.5
1.1
1.3
1.3
1.8
0.8
0.4
10.3
18.0
17.5
31.2
15.3
4.0
1.8
1.4
1.8
1.6
0.1
1.5
2.4
1.6
2.5
2.3
0.3
2.0
35.8
18.6
9.8
8.1
1.7
1.4 18.5 18.4
2.4
2.7
3.0
14.9
14.5
33.6
14.1
15.6
12.3
11.7
3.4
2.4
3.0 25.4 25.0
2.1 15.4 16.4
3.3
1.1
3.7
1.3
3.6
15.4
14.1
12.3
3.4
2.9 24.9 24.6
3.1
3.6
Average
China/Hong Kong
SAIC Motor Corporation
Great Wall Motor Co Ltd
Dongfeng Motor Group
WeiChai Power
Brilliance China Automotive
Holdings
Guangzhou Automobile Group
Geely Automobile
Zhongsheng Group
Baoxin Auto Group
China ZhengTong Auto Service
Sinotruck HK
NR
NR
NR
NR
RMB
HKD
HKD
HKD
NR
NR
NR
NR
14.17
33.35
11.42
25.75
NR
NR
NR
NR
NR
NR
NR
HKD
HKD
HKD
HKD
HKD
HKD
HKD
NR
NR
NR
NR
NR
NR
NR
8.67
8.02
3.64
8.72
6.20
4.18
4.05
Average
Indonesia
Astra International
Indomobil Sukses Int'l
NR
NR
IDR
IDR
NR
NR
6,950
5,200
28,449.0
1,453.9
Average
17.2
28.6
16.5
13.4
7.8
17.8
15.2
29.6
13.2
2.8
Share price date: 17 June 2013
3
BACKGROUND INFORMATION
Leader in Malaysia’s automotive industry
UMW Holdings Berhad (UMW) is a leading industrial enterprise which focuses on four
strategic businesses namely, automotive, equipment, manufacturing & engineering and oil &
gas industries. UMW was founded in 1917 when Chia Yee Soh, the group's founder, set up a
small automotive spare parts shop named United Motor Works. In 1987, Permodalan
Nasional Berhad (PNB) bought out UMW and become its major shareholders as the group
experienced financial difficulty due to the economic crisis. Subsequently, UMW formed a
joint venture company, Perodua, with Japanese partners and holds 38% of it. The company
started operations in 1994 and Perodua Kancil (the second Malaysian car project) was
introduced to the Malaysian market in August the same year.
Focuses on four strategic
businesses - automotive,
equipment, manufacturing &
engineering and oil & gas industries
UMW has gradually expanded its business and ventured into equipment and manufacturing
& engineering industry. The group started its oil & gas division in 2002 through an assorted
portfolio of greenfield investments and acquisitions. Since then, automotive, equipment,
manufacturing & engineering and oil & gas division have become UMW’s core businesses.
Leads the Malaysia’s automotive
industry with 47.1% market share
Apart from Malaysia, UMW has international presence in Singapore, Indonesia, Thailand,
Myanmar, Vietnam, Papua New Guinea, Australia, Taiwan, China, Hong Kong, India, Oman
and Turkmenistan. It currently has a total of 128 branches, 191 dealers and staff strength of
about 13,142. The group leads the Malaysia’s automotive industry with 47.1% market share
via Toyota (17%) and Perodua (30.1%) marques in 2012.
Figure 5 : Key achievements / milestones of UMW
Source: Company, Alliance Research
4
Figure 6 : Domestic and international presence
Major shareholders
PNB and EPF are major
shareholders
UMW has 2 major shareholders, namely PNB and EPF, which hold approximately 42.5% and
14.0% stake in UMW (direct and indirect).
Management
The management of UMW is currently led by Datuk Syed Hisham Bin Syed Wazir, which was
appointed as President & Group CEO in 2010. He has almost 30 years of professional
experience, including senior management positions in the automotive field. He served as
Managing Director of Edaran Otomobil Nasional Bhd from 12 May 2005 to 31 August 31
2009. Subsequently, he served as the Chief Operating Officer at Naza Kia Sdn Bhd and Naza
Kia Services Sdn Bhd from December 2009 to August 2010.
Figure 7 : Board of directors
No.
1
2
3
4
5
6
7
8
Name
Tan Sri Asmat bin Kamaludin
Datuk Syed Hisham bin Syed Wazir
Dato’ Dr. Nik Norzrul Thani bin N.Hassan Thani
Dato’ Mohd. Nizam bin Zainordin
Dato’ Siow Kim Lun
Wan Kamaruzaman bin Wan Ahmad
Dr. Leong Chik Weng
Khalid bin Sufat
Designation
Group Chairman/Non-Independent Non-Executive Director
President & Group CEO/Non-Independent Executive
Non-Independent Non-Executive Director
Independent Non-Executive Director
5
BUSINESS STRUCTURE
UMW is involved in the automotive, equipment, equipment and manufacturing &
engineering and oil & gas businesses in Malaysia and internationally. The automotive division
is the largest contributor to the group’s revenue (72%), followed by equipment (13%), oil &
gas (10%) and manufacturing & engineering (4%) in FY12.
UMW plans to list its oil & gas unit by 4Q this year. The group will sell 39% of its stake in the
IPO and retain 61% stake in the soon-to-be listed company, which will called UMW-OG
Group. The listing will only comprises of the drilling and oil field services while the other
unprofitable oil & gas associate (mainly manufacturing of pipes and fabrication) will be
classified under the “Other” division in the UMW Group going forward.
Figure 8 : Review of business segments
Automotive
UMW Toyota Motor
 Lexus
 Toyota
Perusahaan Otomobil
Kedua
 Perodua
Manufacturing &
Engineering
Equipment
Heavy Equipment
 Construction
 Mining
 Agriculture
 Forestry
 Industrial
 Fire-fighting and oil
spill
Industrial Equipment
 Material-handling
equipment
 Industrial cleaning
equipment
 Type & batteries
Lubricants & Fluids
 Pennzoil
 Repsol
 Grantt
 GEP fluids &
coolants
Drilling Operations
 Semi-submersible
rig
 Jack-up rigs
 Land rigs
 Workover rigs
Shock Absorbers /
Power Steering
 KYB
Oilfield Services
 Generator
packages
 Pipe coating
 Pipe inspection,
repair & threading
Auto Components
 Filtration products
 Metal stamping
 DENSO spark plugs
& wiper blades
 GEP filters & brake
pads
Marine & power
equipment
 Industrial
compressors
 Marine engines
 Industrial standby
generators
 Power products
 CNG refueling
stations
Oil & Gas
Manufacture of Pipes
 Seamless OCTG
 SSAW Line Pipes
 LSAW Line Pipes
Fabrication
 Onshore &
offshore structures
 Industrial cranes
Oilfield Products
6
AUTOMOTIVE
Automotive is the largest division
which contributed 72% of total
revenue for FY12
Automotive is UMW’s largest division, accounting for RM11.5bn or 72% of total revenue for
FY12. The group leads the Malaysia’s automotive industry with 47.1% market share via
Toyota (17%) and Perodua (30.1%) marques in 2012. The group has an extensive product
range (sedan, MPVs, SUVs & 4WD, hybrid, van and sports) to capture different market
segment or niches. It currently has a broad sales network with 191 dealers (54 for Toyota and
142 for Perodua).
Figure 9 : UMW auto division structure
Source: Company
Toyota
17.0%
Perodua
Proton
22.5%
Source: Company
Source: Company
7
Others
Nissan
5.8%
Volkswagen
Honda
5.6%
2012
Hyundai, Kia
Perodua
30.1%
Toyota
Hyundai, Kia
2.1%
2011
Nissan
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Others
14.9%
Proton
Volkswagen
2.1%
Figure 11 : Sales unit by brands
Honda
Figure 10 : Breakdown of Malaysia TIV’s market share (2012)
Figure 12 : Model range
Source: Company
Toyota - market leader in the non-national car segment
Engaged in the
manufacturing/assembly,
marketing and distribution of the
Toyota marque, and the marketing
and distribution of Lexus vehicle
UMW, via its 51% owned subsidiary, UMW Toyota Motor, engaged in the
manufacturing/assembly, marketing and distribution of the Toyota marque, and the
marketing and distribution of Lexus vehicles. Note that Toyota is the market leader in the
non-national car segment in Malaysia and has maintained this leadership position for 23
consecutive years. The group sold 106,622 units of Toyota vehicles in 2012. Its top selling
models such as Vios, Hilux, Avanza and Camry have helped to maintain its remarkable
business success beating other main rivals such as Nissan and Honda, which hold market
share of 5.8% and 5.6%, respectively.
Besides, Toyota also launched its first hybrid model, PRIUS C in February 2012 and has been
well received locally. Subsequently, a sportier variant of the PRIUS C, TRD Sportivo joins the
line-up in January 2013. Meanwhile, UMW is also the exclusive distributor of Lexus vehicles
in Malaysia since 2006.
Figure 13 : Models
Source: Company
8
Figure 14 : Toyota and Lexus unit sales breakdown vs. market share
120,000
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
100,000
80,000
60,000
40,000
20,000
Unit Sales (LHS)
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
-
Market Share of TIV (RHS)
Source: Company
Perodua – market leader in the overall market
Perodua is setting up a new plant in Rawang to produce additional 100,000 vehicles yearly on
a one-shift cycle on top of the existing plant which is able to produce 200,000 units per
annum, on a two-shift cycle. The new plant is expected to be completed by mid-2014. In
tandem with the increase in capacity, Perodua has projected to export 20,000 vehicles
overseas by 2015. It has produced 194,985 units (including export) for 2012.
Figure 15 : Perodua unit sales breakdown vs. market share
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
35%
30%
25%
20%
15%
10%
5%
Unit Sales (LHS)
Source: Company
9
Market Share of TIV (RHS)
2012
2011
2010
2009
2008
2007
2006
2005
0%
2004
Setting up a new plant in Rawang
Its popular model, Myvi was Malaysia’s best-selling model since it was launched in 2005.
Myvi is a subcompact hatchback model targeted to female and first time car buyers. Besides,
Perodua also produces small compact car- Viva, which has a smaller engine capacity (cc) and
cheaper price. On top of that, the Perodua Alza is a compact MPV produced by Perodua
targeted at young families and urban singles.
2003
Myvi is Malaysia’s best-selling
model since it was launched in 2005
UMW is the single largest shareholder (38% stake) of Perodua, the manufacturer of
Malaysia’s second national car, which has a niche market in the affordable segment (Asegment). Perodua has the largest market share in both national-car and total TIV segment.
It captured 30.1% TIV market share in 2012. Perodua vehicles are exported to seven
countries, namely, UK, Singapore, Brunei, Fiji, Nepal, Mauritius and Sri Lanka.
2002
Perodua has the largest market
share in both national-car and total
TIV segment: 30.1% market share
in 2012
EQUIPMENT
Second largest contributor to the
group in terms of revenue and
profit in 2012
The equipment division is the second largest contributor to the group in terms of revenue
and profit in FY12. This division can be categorised into three main segments: heavy
equipment, industrial equipment and marine & power equipment. Its products are being
used in various industries (agriculture, construction, forestry, mining, industrial &
manufacturing and industrial cleaning – food and beverage, material handling and logistics).
Figure 16 : Equipment division
Source: Company
Heavy equipment
31.1% market share of heavy
equipment industry in Malaysia
UMW has built a strong reputation in the construction industry, providing heavy equipment
from renowned brands around the world. Some of the products include excavators, concrete
pumps, loaders and rollers. It currently holds the Komatsu franchise in Malaysia, Singapore,
Papua New Guinea and Myanmar. UMW has a strong presence in the heavy equipment
industry in Malaysia with an overall market share of 31.1%. Besides, its operation in
Myanmar also performed well due to the strong demand for machines from the jade mining
industry.
Industrial equipment
Toyota forklift is one of the top 5
distributors in the world and it has
maintained its No.1 position in
Malaysia for more than 38 years
This division focuses on industrial equipment, material handling equipment and industrial
power products. The products include forklifts, towing tractors, warehouse trucks,
compressors and road sweepers. Toyota forklift is one of the top 5 distributors in the world
and it has maintained its No.1 position in Malaysia for more than 38 years with 50% market
share in the material handling equipment business.
Marine and power equipment
UMW also offers marine and power equipment such as industrial compressors, marine
engines, generating sets and portable power products in this division for more than 40 years.
Its business partners comprise some of the world’s leading multinational names such as
CompAir, Cameron, Mitsubishi and Honda.
10
OIL & GAS
UMW started its oil & gas division
in 2002 through an assorted
portfolio of greenfield investments
and acquisitions
In order to reduce the reliance on automotive, manufacturing and engineering and
equipment segment activities, UMW started its oil & gas division in 2002 through an assorted
portfolio of greenfield investments and acquisitions. Apart from Malaysia, the oil & gas
division currently has operations in Australia, China, India, Indonesia, Oman, Singapore,
Taiwan, Thailand, Turkmenistan and Vietnam. This division consists of five key segments:





The group currently has a fleet of
four offshore drilling-rigs (NAGA 1,
2, 3 and 4)
Manufacture of oil country tubular goods and line pipes
Oil & gas exploration operations and development operations (drilling)
Fabrication of oil & gas and other steel structures
Provision of oilfield services
Supply of oilfield products
The anchor of the oil & gas division is the drilling business and UMW currently has a fleet of
four offshore drilling-rigs (NAGA 1, 2, 3 and 4). NAGA 1, a semi-submersible drilling rig, is coowned with Japan Drilling Co. Ltd. The group also owns and operates two premium jack-up
drilling rigs, NAGA 2 and NAGA 3. NAGA 1 and NAGA 3 are contracted out to Petronas
Carigali Sdn. Bhd. for operations in Malaysia, while NAGA 2 operates in lndonesia for HESS
(Indonesia-Pangkah) Limited. NAGA 4 is a new jack-up drilling rig which was recently
delivered in Feb 2013. NAGA 4 has been chartered out to Petronas Carigali for a duration of
three years, with an option to extend for another two years.
The group has recently announced the acquisition of a fifth drilling rig for a total
consideration of USD223m. The new rig is expected to be completed and delivered by May
2014.
Figure 17 : Details of UMW’s major rigs
Ownership
Year of build
Gross tonnage (tons)
DWT (tons)
Drilling depth (feet)
Operating water depth (feet)
Customers
Contract period
Contract value
Remarks
NAGA 1
NAGA 2
NAGA 3
NAGA 4
To be named
50% *
1974
16,394
21,120
30,000
985
Petronas Carigali
100%
2009
9,627
5,834
30,000
350
HESS
(Indonesia-Pangkah)
3.7 years from Sep 2010
100%
2010
9,627
4,366
30,000
350
Petronas Carigali
100%
2013
10,450
3,500
30,000
400
Petronas Carigali
100%
2014
30,000
400
2 years from Mar 2012
3 Years from 2H 2013 (with twoyear renewal option)
5 years from Nov 2010
Extention for another 2 years
commencing Aug 2016
USD250m (5 years)
USD183m
USD130m (2 years extension)
Will provide the NAGA 2 rig and
Went through a major
refurbishment exercise in 2012, related services to PetroVietnam
in MAY 2013 after completing its
extending its life span for
contract with HESS.
another 15 years
USD105m
USD157.68
The rig is currently under
construction and is expected to
be completed and delivered by
May 2014
* JV with Japan Drilling Co. Ltd
Source: Company, RigZone, Maritime Connector
11
WSP has agreed to take the
company private in 2Q13
UMW’s oil and gas investments also include a 22.3% stake in WSP Holdings Limited (WSP),
which is listed on the New York Stock Exchange. WSP is a leading manufacturer of Oil
Country Tubular Goods (OCTG) in China. The company offers casing, tubing and drill pipes
used for oil and natural gas exploration, drilling and extraction. Note that WSP is a lossmaking entity as the company has been adversely affected by the anti-dumping and
countervailing duties imposed by the United States of America on OCTG imported from
China. WSP has agreed to take the company private in a statement released on 21 February
2013. This privatisation is expected to be completed by the second quarter of 2013.
Excluding the impairment charges due to unfavourable fair value movements in hedging
instruments and overseas investments, UMW’s oil & gas division has successfully turned
around in 2011, primarily due to the contributions from its three offshore drilling rigs (NAGA
1, 2 and 3). This division continued to perform well in 2012 with 22.4% growth in revenue.
MANUFACTURING & ENGINEERING
Manufacturing & engineering is the
smallest business division to UMW
Manufacturing & engineering is the smallest business division of UMW as it only contributed
about 4% of the group’s total revenue in FY12. The group has the exclusive marketing and
distribution rights for Pennzoil (lubricants to vehicles). UMW is also the principal agent for
REPSOL to distribute the REPSOL brand of lubricants throughout Asia (China, Malaysia,
Singapore, Brunei, Papua New Guinea and Myanmar).
Besides, two of its subsidiaries, KYB-UMW Malaysia and KYB-UMW Steering Malaysia
continued to be the largest shock absorber and power steering pump manufacturers in
Malaysia and market leaders in the OEM and replacement automotive products markets.
The group also has a blending plant in Xinhui, China with an annual output capacity of 50m
litres. The plant, which blends and distributes REPSOL and GEP branded lubricants, has
expanded the distribution network to South, West and Central China, Hong Kong and Macau.
UMW also has presence in India where one of its Indian’s subsidiaries, UMW Dongshin
Motech, is a major OEM for stamped automotive body parts for car manufacturers in India.
Its customers in India include General Motors, Volkswagen, Tata and Hyundai.
Figure 18 : Key products
Source: Company
12
INVESTMENT CASE
Intensifying competition in the auto sector
We believe the local automotive
industry has become increasingly
more dynamic and competitive
We believe the local automotive industry has become increasingly more dynamic and
competitive; this is especially for the non-national car segment. Toyota, together with the
other two Japan automaker rivals Honda and Nissan, has been aggressive in marketing their
cars to recapture lost market share to U.S, European and South Korean marques. The newest
entry of Nissan Almera into the highly competitive B-segment market is expected to intensify
competition in the market, both national and non-national segment.
UMW expects Toyota sales to reach
105,000 units (-1.5% y-o-y) and
Perodua sales of 194,000 (+2.6% yo-y) in 2013
UMW expects Toyota and Perodua sales to reach 105,000 units (-1.5% y-o-y) and 194,000
units (+2.6% y-o-y), respectively in 2013. Toyota will only launch 1 new model this year while
Lexus will introduce 1 or 2 new models but sales volume is expected to be very low.
Management highlighted that a 3rd-generation Toyota Vios (new model) is targeted to be
launched in Malaysia by 3Q. Meanwhile, the highly speculated new Toyota Corolla Altis
model will only be launched in 2014.
Duty exemption on hybrid cars has
led to a surge in sales
On the other hand, the exemption of hybrid cars from import and excise duties until 31
December 2013 has led to a surge in hybrid vehicle sales. The sales of hybrid cars had
increased 84% to 15,355 units compared to 8,334 units in 2011. We gather that Toyota’s
compact hybrid model, Toyota PRIUS C, has been extremely well received by customers since
its introduction in February 2012. Management highlighted that over 4,000 units have been
sold as at 11 Jan 2013 and demand continues to be high as it is one of the most affordable
hybrid models available in the market.
To capitalise on the demand trend, UMW Toyota Motor has added a TRD Sportivo version to
its PRIUS C line-up in January, which is priced at RM103,990 compared to PRIUS C at
RM97,300. Nonetheless, we believe the newly launched of Honda Jazz hybrid CKD (complete
knock-down), Honda Insight and CR-Z may threaten the sales of Toyota Prius C due to
competitive pricing. In-terms of market share, Honda is still the market leader in Hybrid
segment with 57% market share in 2012, followed by Toyota ( 37%), Lexus (6%) and Porsche
(<1%).
In a nutshell, we do not rule out the possibility that Toyota might lose market share to its
rivals if the launch of new models do not take place in time.
Figure 19 : Toyota PRIUS C and Toyota PRIUS C TRD Sportivo
Source: Toyota Malaysia
13
Perodua has recently launched its
new 2013 S-series line, which is
expected to be the main sales
driver this year
As for Perodua, it has recently launched its new 2013 S-series line, the Perodua Myvi 1.3 SE,
the Perodua Viva S and the Perodua Alza S which are expected to be the main sales drivers
this year. The S-Series models are facelift models which are set to replace the current Viva
BZ, Myvi 1.3 Premium and standard Alza variant. The S-Series models are expected to make
up 45% of Perodua’s total sales for 2013. Besides, a 3-year free service for all models (deal is
worth RM1,100 to RM1,200) is expected to be one of the attractive points to lure buyers.
Figure 20 : Perodua S-Series
Source: Toyota Malaysia
Unlocking oil & gas value via an IPO
Undergoing a restructuring exercise
for its oil & gas division
Planning to list its oil & gas division
by 4Q 2013
UMW is undergoing a restructuring exercise for its oil & gas division. The higher revenue
contributions from NAGA 1, NAGA 2 and NAGA 3 coupled with higher day-rate has helped to
turnaround the segment after two consecutive years of losses. Management expects this
division to perform better in FY13 mainly driven by full year contribution from NAGA 1,
NAGA 4 (newly secured contract) and the commissioning of the new Electric Resistance
Welded (ERW) and coating plant in China. To recap, UMW did not enjoy a fully contribution
from NAGA 1 in FY12 as rig upgrading works were carried out for a duration of 281 days
(from 13 Apr 2012 until 18 Jan 2013).
On the other hand, UMW is planning to list its oil & gas division by 4Q of 2013. The group will
sell 39% of its stake in the IPO and retain 61% stake in the soon-to-be listed company, which
will called UMW-OG Group. The listing will only comprises of the drilling and oil field services
while the other unprofitable oil & gas associate (mainly manufacturing of pipes and
fabrication) will be classified under the “Other” division in the UMW Group going forward.
We believe the listing could unlock the value of its investment in their oil & gas assets and
the proceeds could be utilised to pare down borrowings (assuming UMW will undertake
offer for sale). The listing could be also one of the best alternatives to fund future capex
requirements for the oil & gas business. To note, UMW will recognise a one off disposal gain
(which depends on the listing price and size of disposal) from the listing of the O&G division.
That said, earnings contribution would also drop due to reduced equity holding post the IPO.
14
No issue in securing new contract
th
5 rig to be delivered by 2Q 2014
Well-positioned to capitalise on
Petronas’ preference for locallyowned rigs
The newly delivered jack-up drilling rig, NAGA 4 has been chartered out to Petronas Carigali
for a duration of three years with higher chartered rate (approximately USD146,000 per day),
with an option to extend it for another two years. We view that PETRONAS’s local preference
policy is beneficial to UMW, as their Malaysian flagged rigs would be preferred over foreignowned rigs. A key local competitor for now is Perisai Petroleum Teknologi, who has not yet
take delivery of their first rig. To note, we do not consider SapuraKencana as a direct
competitor as they focus on tender barge rigs.
The group has also recently announced the acquisition of its fifth drilling rig for a total
consideration of USD223m. The new rig is expected to be completed and delivered by May
2014. Management has guided that the group has submitted several bids in Malaysia and
within ASEAN, and is confident of securing at least one long-term contract. Thus, the
acquisition will enable UMW to capture available business opportunities on the back of
current high demand for rigs.
We highlight that demand for offshore drilling services has been propelled by a surge in E&P
activities as Malaysia looks to transform itself into a regional oil & gas trading hub by 2020.
Local oilfield service providers (especially for the upstream players) are in the midst moving
into a boom cycle, leveraging on the government's interest in promoting the country's
petroleum industry and PETRONAS’s planned capex of RM60bn per annum (RM300bn over 5
years). We believe UMW is well-positioned to capitalise on PETRONAS’ preference for
locally-owned rigs and its continued support in developing local oil & gas service companies.
More jack-up rigs and lift boats are expected to be deployed in 2013 to meet continuing
strong demand within the oil and gas industry. On the other hand, we gather from Rigzone
website that jack-up rig utilisation is healthy globally and has increased from 79% one year
ago to 83.1% utilisation now.
Figure 21 : Historical competitive offshore rig utilization by rig type
Rig Type
Drill Barge
Current
80.0% (8/10)
Month Ago
80.0% (8/10)
6 Months Ago
90.0% (9/10)
Drillship
82.9% (68/82)
82.7% (67/81)
84.8% (67/79)
81.3% (61/75)
0.0% (0/1)
0.0% (0/1)
0.0% (0/1)
100.0% (1/1)
Inland Barge
1 Year Ago
80.0% (8/10)
Jackup
84.0% (342/407)
83.2% (337/405)
82.1% (320/390)
79.0% (305/386)
Semisub
91.1% (173/190)
90.0% (171/190)
82.1% (156/190)
81.2% (151/186)
Tender
81.3% 74.2% 82.8% 86.2% (26/32)
(23/31)
(24/29)
* Utilization numbers are based on a snapshot rig count. Only competitive rigs are included.
Source: Rigzone
15
(25/29)
Figure 22 : Type of drilling units
Source:Rigbook
Figure 23 : Onshore and offshore drilling
Source:Rigbook
New NAP – A wait and see approach
Another revision of the National
Automotive Policy (NAP) is
expected to be announced in the
near term
Consumers are expected to adopt a
wait and see approach in view of
the impending NAP review
Another revision of the National Automotive Policy (NAP) is expected to be announced in
2013 whereby more liberalisation measures may be implemented. We opine that gradual
liberalisation will help to improve market sentiment and increase TIV as consumers tend to
replace their vehicles more frequently, given a wider variety of competitively priced models.
We believe the up-coming review of NAP may lead to the reform of the whole local
automotive industry to compete with Thailand or even Indonesia's automotive industry.
For the time being, some consumers are still adopting a wait and see approach in view of the
impending NAP review, which would see the gradual reduction of import tax and excise duty,
in our view. Besides, as the domestic automotive industry already strives towards higher
component localization, a review of tax structure in the auto sector is highly anticipated.
16
Decent dividend payout ratio
We believe a steady dividend payout is part of the long-term strategy of UMW to provide
attractive risk-adjusted returns to its stockholders. The group has consistently pay out 58% to
76% of its net profits as dividends in the past five years. UMW has a dividend policy of paying
out at least 50% of its PAT. We are forecasting a dividend payout of 60% from FY13
throughout FY15. This translates into a dividend yield of 3.9% - 4.6% for FY13-FY15.
Dividend payout ratio of 58% to
76% over the past five years
Figure 24 : Dividend payout ratio
Figure 25 : Dividend per share
% of PAT
60
37.0
40
30
19.0 20.5
62.3
67.1
30.0 31.0
20.0
2011
2004
12.0 10.5
2003
2015F
2014F
2013F
2012
2011
2010
2009
2008
2007
0
2006
10
0
2005
10
2004
20
2003
20
2006
28
30.0
2005
40
30
50.0
50
56.4
2015F
51
2010
50
70
60
2009
50
49
60
2008
45
60
2007
60
61
59
2014F
58
2013F
70
(sen)
80
73
2012
76
80
FINANCIAL HIGHLIGHTS
Sterling performance in FY12
Higher revenue from the
automotive (+18.8% y-o-y) and oil
& gas segment (+39.9% y-o-y)
UMW posted a sterling performance in 2012 where its core net profit (excluding exceptional
items) surged 22.8% and surpassed the RM1bn mark for the first time in the group’s history.
The commendable results were mainly driven by higher revenue from the automotive
(+18.8% y-o-y) and oil & gas segments (+39.9% y-o-y). On top of that, the equipment and
manufacturing & engineering segments also showed some improvement.
Automotive division registered strong revenue growth due to the higher TIV number
achieved. For 2012, Toyota and Perodua reported 294,024 units of total vehicle sales, an
increase of 8.7% or 23,480 units compared with 270,544 units in 2011. With that, the group’s
market share has also improved by 2 percentage point to 47% in 2012. Note that the group
has launched 7 new models in 2012(Toyota Avanza, Toyota Prius C-1.5 hybrid, Lexus GS
series, Lexus RX series, Toyota Camry, Toyota 86 and Lexus LS series).
On the other hand, the oil & gas division also witnessed a strong growth of 39.9% in revenue.
The oil & gas segment has turned to the black in FY12 and contributed a profit of RM57.1m
against a loss of RM245.9m in FY11. The full-year contribution from NAGA 3, additional
revenue contribution from the Garraf Power Plant Phase 1 project and higher contribution
from HAKURYU 5, a semi-submersible drilling rig were the main contributors to earnings
growth.
17
Figure 26 : Revenue breakdown by segment (FY12)
Automotive
72%
Figure 27 : PBT breakdown by segment (FY12)
Equipment
14%
Manufacturing
and Engineering
4%
Automotive
88%
Equipment
9%
Manufacturing
and Engineering
0%
Oil and Gas
3%
Oil and Gas
10%
FY13 earnings would be driven by oil & gas division
Slowdown in earnings growth due
to competition in automotive
industry
Flattish TIV
Better earnings prospect from O&G
16.8% PAT growth
We believe intensifying competition in the automotive segment could result in higher sales &
marketing expenses. On top of that, generous incentives coupled with rebate and financial
deal to maintain high sales volume may also weigh on margins and earnings.
We expect Toyota & Lexus sales to reach 106,000 units (-0.6% y-o-y) in FY13, to be slightly
better than management’s forecast of 105,000 units. Historically, management has given
very conservative guidance in-terms of sales volume.
Nonetheless, the slowdown in the automotive segment will be offset by the strong growth in
the oil & gas segment. We expect better earnings this year mainly driven by higher
contribution from the drilling segment. Note that UMW will receive full year contribution
from NAGA 1 after the completion of rig upgrading works on 18 Jan 2013, higher day rate for
NAGA 2 and the maiden contribution from the new delivered jack-up rig, NAGA 4. Overall,
we expect UMW to register a core earnings growth of 16.8% to reach RM1,097.7m in FY13
underpinned by 3.2% increase in revenue.
Moderate earnings growth in FY14 and FY15
We expect moderate earnings
growth in FY14 and FY15
We expect revenue to grow at three-year CAGR of 4.4% between FY12 - FY15. We expect the
revenue contribution from automotive will increased by 4.2% and 3.2% in FY14 and FY15,
respectively. The completion of Perodua’s second manufacturing plant by mid-2014 will
boost its capacity by another 50% or additional 100,000 units per annum. Note that the new
plant will be running on a one-shift cycle compared to a two-shift cycle at the existing plant.
Besides, the PBT contribution from oil & gas segment will increase by 57% and 23% in FY14
and FY15, respectively. The earnings growth is mainly supported by (1) full year contribution
from NAGA 4 and the fifth jack-up rig (potentially to be named as NAGA 5), (2) higher charter
rate for rigs, and (3) margin improvement.
Higher day rate and maiden
contribution from NAGA 5
Note that NAGA 5 will be delivered in May 2014 and we had already factored in higher day
rate and maiden contribution into our forecast. Overall, we expect 11.5% three-year earnings
CAGR over the FY13 - FY15 period.
18
Figure 28 : Revenue breakdown (RM m)
20,000
15,000
10,000
5,000
FY15F
FY14F
FY13F
FY12
FY11
Manufacturing & Engineering
Oil and Gas
Others
FY15F
Equipment
FY14F
Automotive
FY10
FY09
0
Figure 29 : PBT breakdown (RM m)
2,750
2,250
1,750
1,250
750
250
Automotive
Equipment
FY13F
FY12
FY11
FY10
FY09
-250
Manufacturing and Engineering
Oil and Gas
Others
Figure 30 : Segmental breakdown with forecast
FY09
Revenue
Automotive
Equipment
Oil and Gas
Others
Total
FY10
FY11
FY12
FY13F
FY14F
FY15F
8,347.3
1,172.0
486.5
693.0
22.1
10,720.9
9,935.8
1,570.8
640.9
633.3
39.4
12,820.2
9,699.0
2,078.9
670.4
1,109.6
(22.2)
13,535.8
11,498.1
2,138.5
699.6
1,551.0
(23.5)
15,863.6
11,595.9
2,198.7
734.5
1,866.6
(23.5)
16,372.2
12,080.4
2,262.8
771.3
2,178.3
(23.5)
17,269.2
12,472.8
2,328.8
809.8
2,478.8
(23.5)
18,066.6
PBT
Automotive
Equipment
Oil and Gas
Others
Total
738.2
83.5
23.1
37.7
(36.0)
846.5
1378.0
103.9
39.1
(180.4)
(27.4)
1313.2
1547.9
70.5
(11.9)
(245.9)
4.7
1365.3
1796.8
183.5
3.6
57.7
(31.8)
2009.7
1803.2
202.6
6.2
163.1
(31.8)
2143.3
1899.9
201.0
5.7
255.2
(31.8)
2330.1
2000.9
201.4
6.0
314.3
(31.8)
2490.9
PBT margin
Automotive
Equipment
Oil and Gas
8.8%
7.1%
4.7%
5.4%
13.9%
6.6%
6.1%
-28.5%
16.0%
3.4%
-1.8%
-22.2%
15.6%
8.6%
0.5%
3.7%
15.6%
9.2%
0.8%
8.7%
15.7%
8.9%
0.7%
11.7%
16.0%
8.6%
0.7%
12.7%
* including adjustments and eliminations
19
INVESTMENT RISKS
Increase in raw material prices
Raw material accounts for more
than 1/3 of cost of sales
The risk of rising raw material price (i.e. steel and aluminium) could exert pressure on profit
margins at automotive segment. Raw materials could accounts for more than one third of
the cost of sales for the automotive segment.
Fluctuation in currency
Currency fluctuation will pose
challenge to UWW
The fluctuation of foreign exchange rates, particularly the US dollar (USD) against Malaysia
Ringgit (MYR) will pose challenge to UMW as most raw materials and imported kits are
purchased in USD. Thus, appreciation of USD can have a substantial impact on the group’s
margin.
Figure 31 : Malaysian Ringgit (MYR) to 1 US Dollar (USD)
3.80
3.70
3.60
3.50
3.40
3.30
3.20
3.10
3.00
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
2.90
Source: Bloomberg
Interest rate hike and credit tightening
Interest rate hike and macro
prudential lending measures will
lead to slowdown in car sales
Interest rate hike will have a significant impact on the automotive industry as it will adversely
affect buyers’ affordability which will lead to sluggish sales demand. Besides, macroprudential lending measures implemented or to be implemented by Bank Negara Malaysia
(BNM) such as credit evaluation using net pay, lowering of loan tenure etc would also
negatively affect auto sales.
Supply chain disruption risk
Supply chain disruption will have a
huge impact on the global
automotive industry
Supply chain disruption due to natural catastrophes will have a huge impact on the global
automotive industry. This can be observed from the Japanese tsunami/earthquake and
flooding in Thailand in 2011, which have shown just how vulnerable global supply chains
have become.
Increase in cost of living
Sharp increase in cost of living will
adversely affect demand for new
cars
Any increase in cost of living due to inflation (higher fuel prices, GST implementation, subsidy
rationalisation) will lower the disposable income of potential car buyers. This will affect the
demand for new vehicles.
20
Sharp decline in crude oil prices and delay of contract awarded
Sharp fall in crude oil price may
lead in scaling back of O&G capex
A sudden sharp decline in crude oil prices may contribute to the scaling back of capex
spending and slowdown of contract award in the oil & gas industry. This would definitely
exert some downside risk to earnings as the fixed cost (i.e. depreciation charge) will continue
to weigh on margins.
VALUATION AND RECOMMENDATION
Significantly outperformed FBMKLCI over the last 12 months
UMW has significantly
outperformed the FBMKLCI over
last 12 months
As illustrated by Figure 33, UMW has significantly outperformed the FBMKLCI over the last
12 months. Its share price has appreciated by almost 85% since June 2012, indicating strong
buying interest. We believe the strong performance was mainly due to the better financial
performance, turnaround in the oil & gas segment and the potential listing of this division.
Nonetheless, we believe further share price appreciation is now limited.
Figure 32 : Relative performances of local automotive players vs. FBMKLCI (1 June 2012 – 17 June 2013)
80%
UMW
70%
60%
50%
40%
Tan Chong
30%
20%
10%
DRB
FBM KLCI
0%
Source: Bloomberg, Alliance Research
21
May-13
May-13
Apr-13
Mar-13
Feb-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
Jun-12
Jun-12
-10%
Initiate coverage with NEUTRAL call
Most of the positives have already
been priced-in given its rich
valuation
We believe that most of the positives have already been priced-in given UMW’s rich
valuation. UMW is currently trading at CY13 and CY14 P/E of 16x and 14x, respectively which
are at a premium to its local peer average of 11x-13x and regional peers average of 8x-14x.
When compared to its historical P/E valuation, UMW is now trading at almost 2 standard
deviations above its mean P/E of 12x.
While we are positive on the long-term fundamentals of UMW, we believe tougher near
term competition in the auto sector, especially in mid-to-high-end sedan segment, may
negatively affect UMW and offset gains to be made in other segments.
Initiate coverage with NEUTRAL call
and TP of RM13.60
We use a sum-of-parts valuation methodology to value UMW’s diverse investments and
businesses. Our valuation method yields a target price of RM13.60 per share (refer to Figure
34). This translates into a FY13 and FY14 P/E of 14.5x and 13.1x, respectively. The TP of
RM13.60 implies a potential downside of -2.9% (after taking into consideration the dividend
yield of 3.9%). With that, we rate UMW as NEUTRAL.
Figure 33 : Target price based on DCF based on FY14 estimates
Net profit
(RM m)
P/E
(x)
Equity Value
(RM m)
Automotive
857.8
12
10,293.5
Equipment
143.0
10
1,429.9
Oil and Gas
203.1
20
4,061.5
1.2
10
12.4
Others
8.7
9
78.5
Segments
Total Equity Value (RM m)
15,876
Number of shares (m)
1,168
Target Price (RM)
13.60
Source: Alliance Research
22
Appendix I
Figure 34 : Domestic automotive duty structure for CBU and CKD
ASEAN (CEPT)
Type/Engine
Capacity (cc)
CBU Vehicles
CKD Component
Effect. 23.3.2006 Effect. 1.1.2007
Passenger
Vehicles
< 1800
≥ 1800 - < 2000
≥ 2000 - < 2500
≥ 2500 - ≤ 3000
> 3000
Non ASEAN (MFN)
CBU Vehicles
Effect. 23.3.2006 Effect. 1.1.2007
CKD Component
Effect. 23.3.2006 Effect. 1.1.2007
Effect. 23.3.2006 Effect. 1.1.2007
ID
ED
ST
ID
ED
ST
ID
ED
ST
ID
ED
ST
ID
ED
ST
ID
ED
ST
ID
ED
ST
ID
ED
ST
5%
5%
5%
5%
5%
75%
80%
90%
105%
125%
10%
10%
10%
10%
10%
5%
5%
5%
5%
5%
75%
80%
90%
105%
105%
10%
10%
10%
10%
10%
0%
0%
0%
0%
0%
75%
80%
90%
105%
125%
10%
10%
10%
10%
10%
0%
0%
0%
0%
0%
75%
80%
90%
105%
105%
10%
10%
10%
10%
10%
30%
30%
30%
30%
30%
75%
80%
90%
105%
125%
10%
10%
10%
10%
10%
30%
30%
30%
30%
30%
75%
80%
90%
105%
105%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
75%
80%
90%
105%
125%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
75%
80%
90%
105%
105%
10%
10%
10%
10%
10%
5%
5%
5%
5%
5%
5%
60%
65%
75%
90%
105%
125%
10%
10%
10%
10%
10%
10%
5%
5%
5%
5%
5%
5%
60%
65%
75%
90%
105%
105%
10%
10%
10%
10%
10%
10%
0%
0%
0%
0%
0%
0%
60%
65%
75%
90%
105%
125%
10%
10%
10%
10%
10%
10%
0%
0%
0%
0%
0%
0%
60%
65%
75%
90%
105%
105%
10%
10%
10%
10%
10%
10%
30%
30%
30%
30%
30%
30%
60%
65%
75%
90%
105%
125%
10%
10%
10%
10%
10%
10%
30%
30%
30%
30%
30%
30%
60%
65%
75%
90%
105%
105%
10%
10%
10%
10%
10%
10%
0%
10%
10%
10%
10%
10%
60%
65%
75%
90%
105%
125%
10%
10%
10%
10%
10%
10%
0%
10%
10%
10%
10%
10%
60%
65%
75%
90%
105%
105%
10%
10%
10%
10%
10%
10%
5%
5%
5%
5%
5%
65%
75%
90%
105%
125%
10%
10%
10%
10%
10%
5%
5%
5%
5%
5%
65%
75%
90%
105%
105%
10%
10%
10%
10%
10%
0%
0%
0%
0%
0%
65%
75%
90%
105%
125%
10%
10%
10%
10%
10%
0%
0%
0%
0%
0%
65%
75%
90%
105%
105%
10%
10%
10%
10%
10%
30%
30%
30%
30%
30%
65%
75%
90%
105%
125%
10%
10%
10%
10%
10%
30%
30%
30%
30%
30%
65%
75%
90%
105%
105%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
65%
75%
90%
105%
125%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
65%
75%
90%
105%
105%
10%
10%
10%
10%
10%
MPV/Vans
≤ 1500
> 1500 - < 1800
≥ 1800 - < 2000
≥ 2000 - < 2500
≥ 2500 - ≤ 3000
> 3000
4WD
< 1800
≥ 1800 - < 2000
≥ 2000 - < 2500
≥ 2500 - ≤ 3000
> 3000
* ID: Import duty, ED: Excise Duties, ST: Sales Tax
Source: MITI
What is a CKD and what is a CBU?
CBU – Completely Built Unit
Completely built unit refers to a car/bike/automobile that is imported from another country
as a fully assembled unit. These automobiles do not require an assembly before they can be
sold out to the buyers in the target country’s markets.
CKD – Completely Knocked Down
Completely knocked down car / bike /automobile is one which is imported or exported in
parts and not as one assembled unit. Such units are first sent to an assembly plant in the
target country where all these parts are assembled and one complete car / bike / vehicle is
made using the imported components. These kinds of units generate employment in the
target country as more machinery and manpower investment is needed to assemble the
components to make the vehicle.
23
Appendix II
National Automotive Policy (NAP) Framework
The policy was formed on 19 October 2005 by the Prime Minister’s Department.
Objectives
The policy is formed on the basis of the following 5 major objectives:





To promote a competitive and viable automotive sector, in particular national car
manufacturers.
To become a regional hub for manufacturing, assembly and distribution for automotive
vehicles.
To enhance value added and local capabilities in the automotive sector.
To promote export-oriented Malaysian manufacturers as well as component and parts
vendors.
To promote competitive and broad-based Bumiputera participation in vehicle
manufacturing, distribution and importation as well as in component and parts
manufacturing.
NAP 2006 Highlights










Local assembly of luxury passenger above 1,800cc and priced above RM150,000 on-theroad fully liberalised. Foreigners can own 100% of assembly operations.
APs to be stopped by Dec 2015. Audit on AP recipients on-going and checks to be done.
Those flouting rules will be removed from list.
Gradual introduction of Vehicle End of Life Policy. For starters, vehicles above 15 years
will have to undergo mandatory inspection during renewal of road tax.
Import Duty structure maintained at 0% for CKD and 5% for CBU for AFTA.
Excise duty structure remains. No changes.
All imported used vehicles prices will be gazetted to prevent under-declaration.
Manufacturing of critical components for cars such as brake system and transmission to
get tax incentives such as Pioneer Status/Investment Tax Allowance.
The import of used parts/components will be prohibited from June 2011.
Proton to establish strategic partnership with a global OEM.
The current policy on the freeze of manufacturing licence for reconditioning and
reassembling (rebuilt) activities is maintained.
NAP Review 2009 Highlights
Objectives from NAP 2006 were maintained but the following factors became the main focus
of the review:



Bring in more sophisticated latest technology into the domestic auto industry
Draw up competitive safety standards and environmental-friendly opportunities
Enhance implementation of the NAP plans
The following are the highlights of the review:






All duties and taxes on CKD and CBU vehicles remain unchanged.
Franchise AP system to be terminated by 31 Dec 31 2020.
Open AP system to be terminated by 31 Dec 2015.
RM 10,000 will be collected for each Open AP, starting 1 Jan 2010.
AP holders will be audited twice a year.
The Customs will maintain an official price list for used CBU vehicles to prevent underdeclaration of the prices of parallel imported vehicles.
24









Import of used vehicles will not be allowed after 2015.
Import of used automotive parts to be banned from June 2011.
Incentives will be provided to encourage the development of local automotive parts.
Mandatory annual comprehensive inspection for vehicles aged 15 years or more before
road tax renewal.
A detailed plan will be introduced further down the road to scrap old vehicles; vintage
vehicles will be exempted.
Proton to form a strategic partnership with an established Original Equipment
Manufacturer (OEM).
Manufacturing Licence (ML) can now be issued for selected vehicle types such as luxury
vehicles, hybrid and electric vehicles, trucks and commercial vehicles.
No equity condition will be imposed in return for the ML.
Incentives, in the form of tax breaks, duties exemption and grants, will be offered to
local assemblers and manufacturers of hybrid and electric vehicles.
25
Appendix III
Figure 35 : Toyota car models
Cars
Toyota 86
Camry
MPVs
Avanza
Innova
SUVs & 4WD
Rush
Fortuner
Hybrid
PRIUS c
PRIUS
Corolla Altis
Hilux
Van
Hiace
Source: Toyota Website
Figure 36 : Perodua car models
Cars
Myvi
MPV
Alza
Viva
Source: Perodua Website
26
Vios
UMW Holdings Berhad
Balance Sheet
FY 31 Dec (RM m)
PPE
Inta ngi bl es
As s oci a tes
Inventori es
Recei va bl es
Other a s s ets
Ca s h a nd ba nk ba l a nces
Total Assets
Financial Summary
2011A
2012A
2013F
2014F
2015F
3,077.2
199.4
1,424.4
1,518.9
1,209.7
891.9
2,219.4
10,541.0
3,195.6
167.1
1,565.2
1,396.1
1,109.2
2,164.2
2,195.1
11,792.4
3,862.4
204.6
1,565.2
1,518.9
1,209.7
1,911.9
2,219.4
12,492.1
4,268.3
119.8
1,565.2
1,834.5
1,568.4
1,418.3
2,495.3
13,269.8
4,657.7
26.2
1,565.2
1,869.2
1,618.7
1,812.6
2,405.8
13,955.3
LT borrowi ngs
ST borrowi ngs
Pa ya bl es
Other l i a bi l i ti es
Liabilities
1,743.3
850.7
1,924.3
444.6
4,962.9
1,858.2
825.2
1,610.3
1,221.1
5,514.8
1,743.3
850.7
1,924.3
1,124.7
5,643.0
1,726.4
1,155.0
2,184.9
727.7
5,794.1
1,743.6
1,166.5
2,226.3
671.9
5,808.4
Sha re ca pi ta l
Res erves
Shareholders' equity
Mi nori ty i nteres t
Total Equity
584.1
3,665.0
4,249.2
1,328.9
5,578.1
584.1
4,266.6
4,850.8
1,426.8
6,277.6
584.1
4,719.1
5,303.3
1,545.8
6,849.1
584.1
5,219.5
5,803.7
1,672.1
7,475.7
584.1
5,758.2
6,342.4
1,804.6
8,147.0
10,541.0
11,792.4
12,492.1
13,269.8
13,955.3
Total Equity and Liabilities
Cash Flow Statement
FY 31 Dec (RM m)
2011A
2012A
2013F
2014F
2015F
1,365.3
297.6
(68.8)
(88.6)
(445.5)
247.9
1,307.8
2,009.7
285.5
(388.2)
(101.4)
(424.1)
(190.6)
1,190.9
2,162.8
310.6
(40.5)
(112.6)
(466.9)
(23.4)
1,829.9
2,349.4
345.0
(55.3)
(113.7)
(495.7)
72.4
2,102.1
2,506.7
374.7
(49.2)
(114.9)
(536.4)
81.6
2,262.5
Ca pex
Others
Investing Cash Flow
(673.7)
155.4
(518.4)
(586.6)
158.6
(428.0)
(1,000.0)
169.6
(830.4)
(800.0)
166.7
(633.3)
(800.0)
174.4
(625.6)
Is s ua nce of s ha res
Cha nges i n borrowi ngs
Di vi dend pa i d
Others
Financing Cash Flow
81.9
(141.5)
(733.4)
(793.0)
11.9
381.9
(863.9)
(470.1)
41.9
(1,148.9)
(1,106.9)
40.5
(1,251.0)
(1,210.5)
(134.0)
(1,290.6)
(1,424.7)
(3.6)
18.5
2,130.8
2,145.6
292.8
(2.8)
2,145.6
2,435.6
(107.4)
2,435.6
2,328.1
258.2
2,328.1
2,586.4
212.2
2,586.4
2,798.6
Preta x profi t
Depreci a ti on & a morti s a ti on
Cha nge i n worki ng ca pi ta l
Net i nteres t recei ved / (pa i d)
Ta x pa i d
Others
Operating Cash Flow
Net ca s h fl ow
Forex
Begi nni ng ca s h
Ending cash
Income Statement
FY 31 Dec (RM m)
Price Date: 17 June 2013
2011A
2012A
2013F
2014F
2015F
Revenue
13,535.8 15,863.6 16,372.2 17,269.2 18,066.6
EBITDA
1,905.4
2,102.8
2,288.6
2,473.1
2,608.7
Depreci a ti on & a morti s a ti on
(297.6)
(285.5)
(310.6)
(345.0)
(374.7)
EBIT
1,607.8
1,817.4
1,978.0
2,128.1
2,234.0
Net i nteres t expens e
(12.6)
(24.4)
(25.4)
(29.0)
(22.5)
Sha re of a s s oci a tes
120.9
164.4
190.7
231.0
279.4
Preta x profi t
1,381.5
2,009.7
2,143.3
2,330.1
2,490.9
Ta xa ti on
(412.0)
(431.6)
(452.5)
(492.1)
(526.1)
Mi nori ty i nteres t
(467.5)
(583.8)
(593.1)
(624.1)
(658.0)
Net profi t
502.1
994.3
1,097.7
1,213.8
1,306.8
Core net profi t
836.7
941.9
1,097.7
1,213.8
1,306.8
Key Statistics & Ratios
FY 31 Dec (RM m)
2011A
2012A
2013F
2014F
2015F
Growth
Revenue
EBITDA
Preta x profi t
Net profi t
Core EPS
5.6%
23.7%
4.0%
-4.7%
42.1%
17.2%
10.4%
45.5%
98.0%
12.4%
3.2%
8.8%
6.6%
10.4%
16.5%
5.5%
8.1%
8.7%
10.6%
10.6%
4.6%
5.5%
6.9%
7.7%
7.7%
Profitability
EBITDA ma rgi n
Net profi t ma rgi n
Effecti ve ta x ra te
Return on a s s ets
Return on equi ty
14.1%
3.7%
29.8%
4.8%
11.8%
13.3%
6.3%
21.5%
8.4%
20.5%
14.0%
6.7%
21.1%
8.8%
20.7%
14.3%
7.0%
21.1%
9.1%
20.9%
14.4%
7.2%
21.1%
9.4%
20.6%
0.25
0.61
0.09
0.23
0.55
0.10
0.21
0.49
0.07
0.22
0.50
0.07
0.21
0.46
0.08
2011A
88,662
-3.6%
5.1%
2012A
106,622
20.3%
5.6%
2013F
106,000
-0.6%
5.5%
2014F
109,180
3.0%
5.7%
2015F
111,364
2.0%
5.7%
Valuation
FY 31 Dec (RM m)
2011A
2012A
2013F
2014F
2015F
EPS (s en)
Core FD EPS (Sen)
Core P/E (x)
EV/EBITDA (x)
43.0
71.7
20.4
9.6
85.1
80.6
18.1
8.7
94.0
94.0
15.5
8.1
103.9
103.9
14.1
7.5
111.9
111.9
13.1
7.0
Net DPS (s en)
Net di vi dend yi el d
31.0
2.1
50.0
3.4
56.4
3.9
62.3
4.3
67.1
4.6
BVPS (RM)
P/BV (x)
3.64
4.01
4.15
3.52
4.54
3.22
4.97
2.94
5.43
2.69
Leverage
Tota l debt / tota l a s s ets
Tota l debt / equi ty
Net gea ri ng
Key Drivers
FY 31 Dec
Toyota & Lexus
Growth
GDP growth
27
DISCLOSURE
Stock rating definitions
Strong buy
Buy
Neutral
Sell
Trading buy
-
High conviction buy with expected 12-month total return (including dividends) of 30% or more
Expected 12-month total return of 15% or more
Expected 12-month total return between -15% and 15%
Expected 12-month total return of -15% or less
Expected 3-month total return of 15% or more arising from positive newsflow. However, upside may not be
sustainable
Sector rating definitions
Overweight
Neutral
Underweight
- Industry expected to outperform the market over the next 12 months
- Industry expected to perform in-line with the market over the next 12 months
- Industry expected to underperform the market over the next 12 months
Commonly used abbreviations
Adex = advertising expenditure
bn = billion
BV = book value
CF = cash flow
CAGR = compounded annual growth rate
Capex = capital expenditure
CY = calendar year
Div yld = dividend yield
DCF = discounted cash flow
DDM = dividend discount model
DPS = dividend per share
EBIT = earnings before interest & tax
EBITDA = EBIT before depreciation and amortisation
EPS = earnings per share
EV = enterprise value
FCF = free cash flow
FV = fair value
FY = financial year
m = million
M-o-m = month-on-month
NAV = net assets value
NM = not meaningful
NTA = net tangible assets
NR = not rated
p.a. = per annum
PAT = profit after tax
28
PBT = profit before tax
P/B = price / book ratio
P/E = price / earnings ratio
PEG = P/E ratio to growth ratio
q-o-q = quarter-on-quarter
RM = Ringgit
ROA = return on assets
ROE = return on equity
TP = target price
trn = trillion
WACC = weighted average cost of capital
y-o-y = year-on-year
YTD = year-to-date
DISCLAIMER
This report has been prepared for information purposes only by Alliance Research Sdn Bhd (Alliance Research), a subsidiary of Alliance
Investment Bank Berhad (AIBB). This report is strictly confidential and is meant for circulation to clients of Alliance Research and AIBB
only or such persons as may be deemed eligible to receive such research report, information or opinion contained herein. Receipt and
review of this report indicate your agreement not to distribute, reproduce or disclose in any other form or medium (whether electronic
or otherwise) the contents, views, information or opinions contained herein without the prior written consent of Alliance Research.
This report is based on data and information obtained from various sources believed to be reliable at the time of issuance of this report
and any opinion expressed herein is subject to change without prior notice and may differ or be contrary to opinions expressed by
Alliance Research’s affiliates and/or related parties. Alliance Research does not make any guarantee, representation or warranty
(whether express or implied) as to the accuracy, completeness, reliability or fairness of the data and information obtained from such
sources as may be contained in this report. As such, neither Alliance Research nor its affiliates and/or related parties shall be held liable
or responsible in any manner whatsoever arising out of or in connection with the reliance and usage of such data and information or
third party references as may be made in this report (including, but not limited to any direct, indirect or consequential losses, loss of
profits and damages).
The views expressed in this report reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the
compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendation(s) or view(s) in
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This research report provides general information only and is not to be construed as an offer to sell or a solicitation to buy or sell any
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AIBB (which carries on, inter alia, corporate finance activities) and its activities are separate from Alliance Research. AIBB may have no
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Published & printed by:
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Bernard Ching
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29

UMW Holdings - Bursa e

Transcription

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