Maybank Investment Bank (Maybank IB) did not see any significant financial impact on UMW from the disposal of 22.2 acres (907,903 sq ft) of land within UMW High-Value Manufacturing (HVM) Park in Serendah, Selangor, to Perodua for RM52.3 million in a related party transaction.
“We are neutral on this development,” it said today (Dec 6) in its research note.
It maintains its BUY rating, earnings forecasts, and TP of RM6.20 (14x FY24E PER; 5Y 12M fwd mean) for UMW.
Maybank IB said it does not foresee any significant financial impact considering the company’s existing net cash position.
The land disposal price (RM54 psf) is determined after applying a 10% discount to the most recent selling price of an adjacent plot, which was RM60 psf.
“UMW anticipates a gain of RM6 million following the disposal. According to our channel checks, the market value of the HVM Park land,
as listed online, is RM75 psf, reflecting a premium of 28% over the disposal price,” it said.
Meanwhile, the research house said it is autiously optimistic on UMW’s outlook.
“Its robust auto division, fueled by a strong local brand presence, solid backlog orders, and enhanced supply chain, is expected to see earnings sustained.
“Demand in the equipment segment will be upheld by infrastructure projects, while the mechanical & engineering segment is projected to grow alongside the auto division.”
It added UMW Lubetech officially opened its new automated lubricants blending plant in Klang’s Pulau Indah Industrial Park.
Operational since April 2023, the plant has a capacity of 60m liters p.a., up from 35m liters in the old Shah Alam facility.
Currently running at 50% capacity, UMW expects to generate around RM300 million in revenue, contributing about 30% to its mechanical & engineering segment based on 2022 figures.
Maybank IB added: “There are several risk factors for our earnings estimates, price target, and rating for UMW. Soft consumer sentiment and unattractive model launches are risks to its motors division.
“Forex volatility will affect its profitability and operational planning. Execution mishap, cost overruns and absence of new orders will cause adverse reaction.
“Acquisition of non-core assets or poor usage of capex will not be well received, particularly at this point of industry cycle.”
