UMW Holdings Bhd (Jan 12, RM 7.00)
Maintain underperform with revised fair value of RM6.20 from RM5.80: UMW Toyota launched the Indonesian-assembled Toyota Avanza yesterday, replacing the long-in-the-tooth previous generation vehicle that dates back to 2004.
Sales of the Avanza averaged about 600 units per month in 2011, making up over 8% of To-yota sales.
The new Avanza comes in 1.3L and 1.5L variants as before and is priced between RM64,590 and RM79,590. We estimate this is about 4% to 14% higher than the outgoing model. UMW Toyota is targeting to sell 8,500 units of the new Avanza in 2012.
During the launch, UMW Toyota Motor president Ismet Suki revealed that the company recorded sales of 89,000 units in 2011, about 3.3% lower than our previous sales estimate.
Vehicle and component supplies from Thailand have been affected by the floods, although the supply situation is expected to normalise in 1Q12. The Malaysian Automotive Association (MAA) is expected to release 2011 total industry volume (TIV) data next week.
UMW is forecasting sales of 93,000 Toyota and Lexus vehicles in 2012, broadly in line with expectation, helped by the planned launch of four new models.
In February, UMW will introduce the new Prius C hybrid that was only recently unveiled at the 2011 Tokyo Motor Show.
The Prius C will be a lower priced alternative to the normal Prius. At RM103,990, it puts it at a similar price point to Honda’s Insight Hybrid (RM98,000).
The next generation Toyota Camry, to be assembled in Shah Alam, should also be introduced by mid-2012.
We have tweaked our sales volume estimates lower to 89,000 units for 2011 but raise it slightly to 93,000 for 2012 and 94,000 units in 2013. We also update our foreign exchange assumptions to reflect the continued strength of the US dollar and the yen.
All in, our net profit estimates for 2011 to 2013 are revised lower by 2.8%, 0.1% and 0.5% respectively.
Upside risks include: (i) stronger economy boosting car sales; (ii) favourable forex trends; and (iii) reduced competition.
We make no change to our “underperform” recommendation on valuation grounds. We lift our price earnings ratio (PER)-based, sum-of-parts derived fair value estimate to RM6.20 (from RM5.80) after ascribing higher target PERs of 10 times, 12 times and nine times to its auto, oil and gas (O&G) and other businesses respectively (from 9.5 times, 11 times and eight times).
The higher PER ascribed to its O&G businesses reflects improving prospects in 2012. The main worry for UMW is margin pressure given that the greenback and yen have appreciated 4.3% and 9.4% respectively against the ringgit in the past six months. However, hopes for a higher dividend payout could keep investor interest up. — RHB Research Institute, Jan 12
This article appeared in The Edge Financial Daily, January 13, 2012.
Maintain underperform with revised fair value of RM6.20 from RM5.80: UMW Toyota launched the Indonesian-assembled Toyota Avanza yesterday, replacing the long-in-the-tooth previous generation vehicle that dates back to 2004.
Sales of the Avanza averaged about 600 units per month in 2011, making up over 8% of To-yota sales.
The new Avanza comes in 1.3L and 1.5L variants as before and is priced between RM64,590 and RM79,590. We estimate this is about 4% to 14% higher than the outgoing model. UMW Toyota is targeting to sell 8,500 units of the new Avanza in 2012.
During the launch, UMW Toyota Motor president Ismet Suki revealed that the company recorded sales of 89,000 units in 2011, about 3.3% lower than our previous sales estimate.
Vehicle and component supplies from Thailand have been affected by the floods, although the supply situation is expected to normalise in 1Q12. The Malaysian Automotive Association (MAA) is expected to release 2011 total industry volume (TIV) data next week.
UMW is forecasting sales of 93,000 Toyota and Lexus vehicles in 2012, broadly in line with expectation, helped by the planned launch of four new models.
In February, UMW will introduce the new Prius C hybrid that was only recently unveiled at the 2011 Tokyo Motor Show.
The Prius C will be a lower priced alternative to the normal Prius. At RM103,990, it puts it at a similar price point to Honda’s Insight Hybrid (RM98,000).
The next generation Toyota Camry, to be assembled in Shah Alam, should also be introduced by mid-2012.
We have tweaked our sales volume estimates lower to 89,000 units for 2011 but raise it slightly to 93,000 for 2012 and 94,000 units in 2013. We also update our foreign exchange assumptions to reflect the continued strength of the US dollar and the yen.
All in, our net profit estimates for 2011 to 2013 are revised lower by 2.8%, 0.1% and 0.5% respectively.
Upside risks include: (i) stronger economy boosting car sales; (ii) favourable forex trends; and (iii) reduced competition.
We make no change to our “underperform” recommendation on valuation grounds. We lift our price earnings ratio (PER)-based, sum-of-parts derived fair value estimate to RM6.20 (from RM5.80) after ascribing higher target PERs of 10 times, 12 times and nine times to its auto, oil and gas (O&G) and other businesses respectively (from 9.5 times, 11 times and eight times).
The higher PER ascribed to its O&G businesses reflects improving prospects in 2012. The main worry for UMW is margin pressure given that the greenback and yen have appreciated 4.3% and 9.4% respectively against the ringgit in the past six months. However, hopes for a higher dividend payout could keep investor interest up. — RHB Research Institute, Jan 12
This article appeared in The Edge Financial Daily, January 13, 2012.
