Hot Stock UMW, KLCI's biggest laggard to date, jumps 5.88%

by **Cals** Wed 17 Feb 2016, 01:28

Hot Stock

[size=28]UMW, KLCI's biggest laggard to date, jumps 5.88%

By Kamarul Anwar / theedgemarkets.com | February 16, 2016 : 2:54 PM MYT

KUALA LUMPUR (Feb 16): UMW Holdings Bhd, the biggest decliner among FBM KLCI component stocks this year, jumped by as much as 39 sen or 5.88% today to become the biggest gainer in today's early session, as global markets received a boost from last week's selloff.

In a note today, JF Apex Securities Bhd said that European stocks yesterday rallied after European Central Bank president Mario Draghi said the central bank was ready to ease policy next month. "Following the bullish overnight performance in Europe, the KLCI is expected to extend its rebound towards its resistance of 1,670 points," it said.

Bloomberg meanwhile reported that world stocks rose sharply on Monday as China's central bank fixed the yuan at a much stronger rate and oil cemented recent gains, easing fears of global deflation.

Asian shares extended their gains on Tuesday on a combination of stabilising Chinese markets, a rebound in oil prices and solid US consumption data.

As at 2:37pm, UMW Holdings' gains were lowered by 28 sen or 4.22% to RM6.91. In comparison, the benchmark KLCI rose 0.83% to 1,633.66 points.

There were 658,400 UMW Holdings shares changing hands as at the last traded time.

Between Dec 31, 2015 and yesterday, UMW Holdings lost 15.76% from last year's closing price of RM7.87, the biggest in quantum among the 30 KLCI blue chips. While the KLCI has been a laggard over the past two years, it lost only 2.51% during the period.

Analysts have been lukewarm towards UMW Holdings, with only one out of 16 covering the diversified conglomerate recommending a "buy".

It suffered earnings contraction in each of the first three quarters of financial year ended Dec 31, 2015 (FY15), given the strong dollar in 2015 lifted the group's cost to procure automotive parts and completely built up vehicles, and tumbling oil prices hurting its oil and gas division.

But analysts have target prices that are wide-ranging and implied as much as 29.38% upside to UMW Holdings' last traded price. Bloomberg data showed that the target prices set are between RM5 and RM8.94.

MIDF Research, which has the latest note on UMW Holdings, said on Feb 4 that it maintained its "neutral" rating on the conglomerate with a target price of RM6.90.

The research outfit laid out these near-term risks to UMW Holdings' earnings: the ringgit's weakness against the US dollar, unfavourable rig contract rates upon renewal and weak underlying demand for auto vehicles.
[/size]