Maybank IB Research maintains underweight on automotive sector

KUALA LUMPUR (Dec 20): Maybank IB Research is maintaining its underweight recommendation on the automotive sector.

'We retain our Hold calls on UMW and MBM while Tan Chong Motor remains a Sell,' it said on Tuesday.

Maybank Research said the sequentially weaker November's total industry volume of 48,702 units (down 9% on-month) was expected and the 11-month vehicles sales of 552,600 units (up 0.4% on-year; 92% of full-year estimates) was on track to meet its 2011 forecast.

'We expect a challenging 2012, on muted +1% to 2% on-year growth. 1Q12 sales will be weak, dampened by distribution issues post Thai flood aftermath. Margin pressure will be a likely drag to profits, on dearer component costs (stronger Yen and USD against RM) and higher A&P costs. In light of this, the sector remains an Underweight,' it said.

UMW dips on weak market, OSK maintains sell

KUALA LUMPUR (Nov 2): Shares of UMW HOLDINGS BHD [] slipped marginally on Wednesday, weighed down by the weak overall market, after winning a US$72 million contract from Petronas Carigali Sdn Bhd.

At 10.01am, UMW was down one sen to RM6.59. There were 77,200 shares done at prices ranging from RM6.57 to RM6.60.

The company announced on Tuesday its 85%-owned UMW JDC Drilling Rig Sdn Bhd, announced on Bursa it would provide a semi-submersible drilling rig, Hakuryu'5 for Petronas Carigali's drilling programme.

However, OSK Research said it was maintaining its Sell call on UMW. It trimmed UMW's oil and gas earnings from the non drilling side, from an aggressive earnings growth of 15% to a contraction of 15% considering the weaker macro outlook for the global economy, which will dent oil demand.

'After incorporating earnings from the Hakuryu'5, we are trimming our FY12 and FY13 earnings by 1.75% and 2.25% respectively. This lowers our sum of parts valuation for UMW to RM6.18,' it said.

Maybank Research Neutral on auto stocks

KUALA LUMPUR: Maybank Investment Bank Research (Maybank IB) said the March 2011 auto sales were abnormally strong, which it viewed as a one-off event.

'Looking ahead, Malaysia's car production is expected to soften in the months ahead, affected by the supply chain disruption in Japan. The auto sector remains a Neutral,' it said on Wednesday, April 20.

Maybank IB Research said the longer-term operating landscape lacks catalyst and remains close ended, deterring foreign automakers from making Malaysia a regional hub.

'Stock-wise, share price is expected to trade sideways. MBM and Tan Chong remains a Buy while Proton and UMW are Holds,' it said.

It said that March total industry volume'' (TIV) jumped an unprecedented 57% on-month to 63,265 units. The strong sales were atypical; the Malaysia Automotive Association (MAA) concurred with this view.

'We opine the unusually strong buying pattern was driven largely by prospective customers front-loading their purchases ahead of the supply chain disruption affecting the auto industry. March 2011 auto sales are arguably the highest, surpassing the previous record of 56,139 units in March 2010. YTD, new registrations grew 7% YoY to 147,415 units,' it said.