Hot Stock UMW falls 4% on 3Q profit, downgrade

by **Cals** Fri 22 Nov 2013, 14:11

Hot Stock UMW falls 4% on 3Q profit, downgrade

Business & Markets 2013

Written by Chong Jin Hun of theedgemalaysia.com

Friday, 22 November 2013 10:16

KUALA LUMPUR (Nov 22): UMW Holdings Bhd fell as much as 4% after the diversified firm reported a weaker third quarter profit. This has resulted in analysts' downgrades for the stock.
At 9.59am, UMW was traded at RM12.18 with 466,700 shares done. The bourse's second-largest decliner had earlier fallen as much as 56 sen to RM12.06.

UMW is the distributor of Toyota cars in Malaysia. The firm's other businesses include oil and gas operations.

Hong Leong Investment Bank Bhd analyst Daniel Wong said the firm has cut its earnings forecast for UMW by 7.7% in FY13. This is followed by a 4% to 5% reduction in FY14 and FY15.

In a note today, Wong said this takes into account "lower average car price and margins (due to Vios lower pricing versus other models as well as higher marketing and distributional cost)."

The earnings downgrade comes with a downward revision in Hong Leong's target price for UMW shares to RM12.25. The "hold" recommendation for UMW however remains.

Hong Leong's note was issued following the announcement of UMW's third quarter financials.

Yesterday, UMW said net profit fell 66% to RM101.45 million in the third quarter ended September 30, 2013 (3QFY13) from RM299.13 million a year earlier. Revenue dropped to RM3.46 billion from RM3.96 billion.

Cumulative 9MFY13 net profit declined to RM572.1 million from RM743.4 million a year earlier. Revenue was lower at RM10.32 billion versus RM11.77 billion.

Despite the lower profit, UMW plans to pay a dividend of 25 sen a share for 3QFY13.

UMW's financials came in below Hong Leong's and street forecast.

"Although we expect stronger earnings in 4QFY13 (on higher car sales), we deemed 9MFY13 result as below expectations.

"Reported 3QFY13 core net profit of RM192.0m and 9MFY13 at RM642.3m vs. HLIB’s RM948.8m (67.7%) and consensus RM997.1m (64.4%)," Wong said.

Meanwhile, BIMB Securities Sdn Bhd said in a note today that UMW shares' immediate technical support and resistance are seen at RM12.53 and RM12.71 respectively.