PP 7767/09/2010(025354)

21 May 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
21 May 2010
MARKET DATELINE

UMW Holdings Share Price

Fair Value
:
:
RM6.19
RM7.52
Recom : Outperform
Sustaining Strong Hold in 1Q10 (Maintained)

Table 1 : Investment Statistics (UMW; Code: 4588) Bloomberg: UMWH MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/NTA EV/EBITDA ROE Gearing GDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2009a 10,697.9 371.1 33.6 (35.8) 18.4 1.9 7.1 10.2% Net Cash 3.2
2010f 10,670.5 621.9 55.3 64.4 11.2 48.0 1.7 5.0 15.3% Net Cash 3.8
2011f 11,062.4 672.1 59.2 7.2 10.5 55.0 1.6 4.8 14.8% Net Cash 4.0
2012f 11,982.5 752.1 66.3 11.9 9.3 55.0 1.4 4.6 14.8% Net Cash 4.1
Main Market Listing / Non-Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates
RHBRI Vs. Consensus
♦ 1QFY12/10 results. 1QFY12/10 results were largely in line with our and Above
market expectations, accounting for 21.4% and 24.7% of our full-year In Line
forecast and market consensus respectively. 1Q revenue was up 2.1% qoq Below
mainly driven by stronger contribution from heavy and industrial
equipment division (+26.1% qoq). Coupled with stronger associate
contribution stemming from stronger unit sales of Perodua (+24.4% qoq), Issued Capital (m shares) 1,134.8
1QFY12/10 net profit growth accelerated from -0.5% qoq (at EBIT) to Market Cap(RMm) 7,024.3
16.0% qoq. Daily Trading Vol (m shs) 0.9
52wk Price Range (RM)
♦ Yoy increase thanks to automotive segment. The yoy revenue and
Major Shareholders:
5.40-6.69
(%)
earnings of 29.1% and 101.4% in 1Q10, respectively were not a surprise,
Skim ASB 43.86
given the high unit sales of Toyota as the economy continues to recover,
EPF 16.59
consumer sentiment improves and demand for premium cars rises in
Nyuk Sang Lim 12.55
tandem with stronger purchasing power.
PNB 6.17
♦ Qoq margins improved. EBIT margin in 1Q10 improved to 9.1% vs.
8.0% in 4Q09 on higher automotive and equipment segment’s profitability. FYE Dec FY09 FY10 FY11
1) Automotive segment was up 35.2% (vs. 10.7% in 4Q09) mainly EPS chg (%) - - -
due to: 1) more favourable movement of RM against Yen and US$; Var to Cons (%) 15.2 7.6 20.5
2) strong GDP growth of 10.1% yoy in 1Q; and 3) better
economies of scale. PE Band Chart
2) Equipment division was up 26.1% (vs. –2.7% in 4Q09) as demand
increased in line with improving economic conditions.
♦ Risks. 1) Lower-than-expected car sales from protracted downturn; 2) PER
PER
=
=
19x
16x
Weakening of RM against US$ and Yen; and 3) Slower-than-expected PER = 13x
production ramp-up of O&G division. PER = 10x

♦ Forecasts. We maintain our 2010-12 TIV for Toyota of 89.7K, 91.3K and
97.3K units respectively. Nevertheless, we highlight that there is upside to
our FY10-11 earnings projections given stronger unit sales for Toyota,
anticipated higher contribution from the O&G division as well as
strengthening of the ringgit against US$ and yen. Relative Performance To FBM KLCI

♦ Investment case. We expect stronger earning growth for Toyota as it will

benefit from improving sentiment and affordability on the back of the
FBM KLCI
economic recovery, as preference towards premium products starts to
improve. We thus reiterate our Outperform call on the stock with a fair
value of RM7.52, based on 16x PER for its automotive and oil & gas UMW Holdings
divisions, 8x for its heavy equipment and 7x for its manufacturing division.

Wong Chin Wai

(603) 9280 2158
Please read important disclosures at the end of this report.
wong.chin.wai@rhb.com.my

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Table 2: Earnings Review

FYE Dec 1Q09 4Q09 1Q10 Qoq yoy 3M09 3M10 yoy Comments
(RMm) (%) (%) (%)
Revenue 2,349.8 2,969.4 3,033.2 2.1 29.1 2,349.8 3,033.2 29.1 Higher qoq due to greater demand
for heavy and industrial
equipment (+26.1% qoq). Higher
yoy is attributed to stronger unit
sales of Toyota (+21.8%) due to
strong economic growth and
improved consumer sentiment.

EBIT 90.6 239.0 277.3 16.0 206.1 90.6 277.3 206.1 Yoy increase due to contribution
from automotive and
manufacturing & engineering
divisions.
Interest exp (10.1) (8.6) (11.4) 32.1 12.0 (10.1) (11.4) 12.0

Interest inc 8.9 8.4 8.6 2.4 (3.5) 8.9 8.6 (3.5)

Associates 34.4 (1.6) 30.5 (1,961.1) (11.2) 34.4 30.5 (11.2) Higher qoq as Perodua's sales
surged 24.4% in 1Q10.

Pretax 123.7 237.2 305.1 28.6 146.6 123.7 305.1 146.6

Taxation (25.6) (67.2) (72.8) 8.3 185.0 (25.6) (72.8) 185.0
Minorities 32.2 (70.2) 99.4 (241.6) 208.5 32.2 99.4 208.5
Net profit 66.0 99.8 132.9 33.2 101.4 66.0 132.9 101.4

Margins (%):
EBIT 3.9 8.0 9.1 3.9 9.1
Pretax 5.3 8.0 10.1 5.3 10.1
Net profit 2.8 3.4 4.4 2.8 4.4
Eff. Tax Rate 20.7 28.3 23.9 20.7 23.9

Table 3: Earnings Review - Segmental Breakdown

FYE Dec 3Q08 2Q09 3Q09 qoq yoy 3M09 3M10 Yoy Comments
(RMm) (%) (%) (%)
Automotive 1,721.25 2,373.08 2,398.31 1.1 39.3 1,721.25 2,398.31 39.3 In line with Toyota's unit sales
performance. Higher yoy due to
stronger consumer sentiment.
Equipment 300.80 295.26 350.36 18.7 16.5 300.80 350.36 16.5 Higher qoq and yoy due to the
strengthening domestic and
external demand as well as
improving regional economic
conditions paticularly in the Asian
region.
Mfg & Eng 114.73 153.22 145.52 (5.0) 26.8 114.73 145.52 26.8 Higher yoy due to pick-up in
global economic activity.
Oil & Gas 217.10 156.05 142.39 (8.8) (34.4) 217.10 142.39 (34.4)
Financial 0.00 0.00 0.00 nm nm 0.00 0.00 Nm
Others 15.88 11.18 18.24 63.2 14.9 15.88 18.24 14.9
Elimination -19.96 -19.36 -21.66 11.9 8.5 -19.96 -21.66 8.5
Revenue 2,349.80 2,969.43 3,033.16 2.1 29.1 2,349.80 3,033.16 29.1 Higher yoy due to better
contribution from automotive,
industrial and heavy equipment
divisions.

Automotive 73.34 236.10 319.11 35.2 335.1 73.34 319.11 335.1 1Q better margins on a yoy basis
due to lower cost of imported
parts as ringgit strengthened
against US$ and unit sales gained
momentum amidst the recovering
economy as well as improved
model mix.
Equipment 22.77 21.67 27.32 26.1 20.0 22.77 27.32 20.0 1Q better margins qoq and yoy
due to lower cost of imported
parts on the back strengthening of
ringgit against yen.
Mfg & Eng 2.84 7.28 11.97 64.5 321.5 2.84 11.97 321.5
Oil & Gas 5.04 14.45 -19.23 (233.1) (481.9) 5.04 -19.23 (481.9) Due to delay in projects .
Financial 0.00 0.00 0.00 nm nm 0.00 0.00 Nm
Others -7.75 -11.02 -34.06 209.1 339.6 -7.75 -34.06 339.6
Elimination 0.00 0.00 0.00 nm nm 0.00 0.00 Nm
Unalloc. ex. -5.62 -29.45 0.00 (100.0) (100.0) -5.62 0.00 (100.0)
EBIT 90.62 239.04 305.09 27.6 236.7 90.62 305.09 236.7

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Table 4: UMW unit vehicle sales

FYE Dec 1Q09 4Q09 1Q10 Qoq yoy 3M09 3M10 yoy
(units) (%) (%) (%)
Toyota 17,336 22,476 21,225 (5.6) 22.4 17,336 21,225 22.4
- Passenger 13,679 17,984 16,496 (8.3) 20.6 13,679 16,496 20.6
- Commercial 3,657 4,492 4,729 5.3 29.3 3,657 4,729 29.3

Perodua 38,390 43,877 47,751 8.8 24.4 38,390 47,751 24.4

- Passenger 38,390 43,877 47,751 8.8 24.4 38,390 47,751 24.4
- Commercial 0 0 0 0.0 0.0 0 0 0.0

Total 55,726 66,353 68,976 6.3 26.6 55,726 68,976 26.6

Source: MAA

Table 5: UMW SOP Valuation

(RMm) Comments

Automotive 5,572.2 16x FY10 PER

Heavy equipment 248.8 at 8x FY10 PER

Manufacturing & 87.1 at 7x FY10 PER
engineering
Oil & gas 2,985.1 At 16x FY10 PER

Total 8,893.1

Add: cash 1,714.3

Less: debt (2,131.7)
Equity value 8,475.7

Issued shares (m) 1,125.4

Fair value (RM) 7.52
Source: RHBRI Estimates

Table 6. Earnings Forecasts Table 7. Forecast Assumptions

FYE Dec (RMm) FY09a FY10F FY11F FY12F FYE Dec FY10F FY11F F12F

Turnover 10,697.9 10,670.5 11,062.4 11,982.5 Toyota TIV (k units) 89.7 91.3 97.3
Turnover growth (%) 7.6 8.6 9.6 10.6 Perodua TIV (k units) 195.1 196.8 202.3
Forex (RM:100JPY)* 3.57 3.56 3.56
EBITDA 920.3 1,330.5 1,368.1 1,521.9 Forex (RM:US$)* 3.30 3.20 3.20
EBITDA margin (%) 8.6 12.5 12.4 12.7
*average rate
Depreciation (168.9) (175.4) (180.0) (184.8)
EBIT 751.4 1,155.1 1,188.1 1,337.1
EBIT margin (%) 7.0 10.8 10.7 11.2

Net Interest (5.2) (23.4) (16.8) (15.4)

Associates 88.4 342.3 377.3 403.3

Pretax Profit 834.6 1,474.1 1,548.6 1,725.0

Pretax margin (%) 7.8 13.8 14.0 14.4
Tax (198.0) (368.5) (387.2) (431.3)
Minorities (265.5) (483.7) (489.4) (541.6)
Net Profit 371.1 621.9 672.1 752.1
Net Profit margin (%) 3.5 5.8 6.1 6.3

Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or

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strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

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actions of third parties in this respect.

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