KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) sees an exciting year ahead for UMW HOLDINGS BHD [] and maintains a Buy call with a sum-of-parts based target price of RM8.90.
HDBSVR said UMW 4Q10's reported net profit of RM18.5 million was mainly dragged by a one-off impairment losses of RM146m, which it believed was largely linked to its Oil & Gas division (that is Naga 2 and Naga 3).
In its research note issued on Friday, Feb 25 it said that excluding the impairment losses, UMW's net profit in 4Q10 would be RM164.5 million (+45% on-year), taking FY10 net profit to RM658.4 million which was within expectations.
HDBSVR said UMW's topline in 4Q10 grew 15.8% y-o-y to RM3.4bn mainly driven by a 6.3% increase in Toyota vehicle sales to 13.5k units (76% of Group revenue), followed by Heavy & Industrial Equipment (+43% to RM423m) and Oil & Gas (+46% to RM224m).
However, its EBIT margin fell to 6.5% (vs 4Q09: 8.0%; 3Q10: 9.6%) partly dragged by impairment losses.
'Maintain Buy. We expect UMW to turn net cash this year with RM387 million (35 sen a share). Share price catalyst from potential listing of O&G division to unlock value given the improved earnings outlook and valuation for O&G sector. Maintain BUY with SOP-based TP of RM8.90,' it said.
HDBSVR said UMW 4Q10's reported net profit of RM18.5 million was mainly dragged by a one-off impairment losses of RM146m, which it believed was largely linked to its Oil & Gas division (that is Naga 2 and Naga 3).
In its research note issued on Friday, Feb 25 it said that excluding the impairment losses, UMW's net profit in 4Q10 would be RM164.5 million (+45% on-year), taking FY10 net profit to RM658.4 million which was within expectations.
HDBSVR said UMW's topline in 4Q10 grew 15.8% y-o-y to RM3.4bn mainly driven by a 6.3% increase in Toyota vehicle sales to 13.5k units (76% of Group revenue), followed by Heavy & Industrial Equipment (+43% to RM423m) and Oil & Gas (+46% to RM224m).
However, its EBIT margin fell to 6.5% (vs 4Q09: 8.0%; 3Q10: 9.6%) partly dragged by impairment losses.
'Maintain Buy. We expect UMW to turn net cash this year with RM387 million (35 sen a share). Share price catalyst from potential listing of O&G division to unlock value given the improved earnings outlook and valuation for O&G sector. Maintain BUY with SOP-based TP of RM8.90,' it said.
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