HLIB advises UMW shareholders to accept mandatory general offer of RM5 a share from Sime Darby
KUALA LUMPUR (Nov 28): Hong Leong Investment Bank (HLIB) Research has maintained its “hold” rating for UMW Holdings Bhd at RM4.90, with an unchanged target price of RM5, and advised shareholders to accept the mandatory general offer (MGO) price of RM5 a share, as it is above the house’s sum-of-parts valuation of RM3.85.
Earlier this month, Sime Darby Bhd obtained shareholders’ approval to buy a 61.18% stake in UMW for RM3.57 billion cash from Permodalan Nasional Bhd (PNB), and make an MGO to acquire the remaining 38.82% stake for RM2.27 billion or RM5 per share.
In a note on Tuesday, the research house said UMW reported core profit after tax and minority interest (Patmi) of RM159.5 million (+38.4% quarter-on-quarter; +40.2% year-on-year) for the third quarter ended Sept 30, 2023 (3QFY2023), and RM405.9 million for the cumulative nine-month period (+22.7% year-on-year), above HLIB’s full-year forecast (81.2%) and the consensus (89.3%).
“We expect sustained 4QFY2023 earnings ahead, leveraging the high order backlogs from the automotive segment and continued economic recovery,” it said.
HLIB said the automotive segment is expected to continue to perform into FY2024, leveraging the strong order backlogs of over 40,000 units of Toyota and 140,000 units of Perodua.
“New order intake remains healthy, resulting in stable order backlogs.
“The management has guided for an improvement in the supply chain situation in the second half of FY2023.
“The negative impact of a depreciating ringgit against the US dollar and higher raw material costs should be partly cushioned by strong sales volumes and continuous cost-efficiency management,” it said.
HLIB also raised its earnings projections for UMW by 15.0%-17.6% for FY2023-FY2025, accounting for stronger automotive sales and earnings.
Sime Darby gets shareholders’ approval to buy UMW from PNB
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