UMW expects higher 2012 earnings
UMW Holdings Bhd, Malaysia’s biggest carmaker and assembler by market value, expects full-year profit to increase as auto sales climb and its oil and gas business rebounds from two years of losses.
The company’s oil and gas business will be profitable this year as its drilling rigs and the trading of oilfield products and services contribute to revenue, Chief Executive Officer Syed Hisham Syed Wazir said. In 2011, UMW’s profit declined 4.7 percent to RM502.1 million (US$162 million), with the unit posting a RM229.6 million loss.
“The worst is over for the division,” Syed Hisham, 58, said in an interview yesterday, declining to give a more specific target for earnings this year. “The scenario is very buoyant and opportunities are increasing.”
The profit gain may help extend its 41 percent rally this year, the second-biggest gain among Southeast Asian automakers and assemblers and the most on Malaysia’s benchmark FTSE Bursa Malaysia KLCI Index. The improving outlook also drew foreign investors, who held 24 percent of the company in the second quarter from 16 percent in the previous three months, according to data compiled by UMW.
Shares of the assembler of Toyota Motor Corp. cars have lagged behind the Malaysian index for the past three years. UMW fell 0.3 percent in 2011, compared with the benchmark measure’s 0.8 percent advance. The gains in the previous two years were also about half of the stock gauge.
Of the 16 analysts who track the stock, 10 rate it a "buy" while five have a "hold", with one recommending investors to "sell".
“UMW has been a laggard,” said Choo Swee Kee, chief investment officer at TA Investment Management Bhd, who manages about RM700 million including UMW shares. “Even with this rise, the valuation is still reasonable compared to other index stocks,” he said, adding that the rally “is sustainable.”
UMW shares trade at 13.2 times estimated earnings, compared with the KLCI Index’s multiple of 15.1, according to data compiled by Bloomberg.
The oil and gas unit is expected to turn in a profit as it expands into the upstream business, Syed Hisham said, referring to exploration and production. The company is also seeking to ride on increased exploration activities by a state-run energy group, he said.
The Selangor-based group, which derived 72 percent of sales last year from manufacturing and assembling cars for Toyota, also increased market share in the Southeast Asian nation’s auto market in the first half of the year. UMW’s share in the country’s passenger-car market rose to 48 percent at the end of June from 45 percent last year, Syed Hisham said, citing Malaysian Automotive Association’s data.-- Bloomberg