KLCI Stock - UMW / 4588 - 2010 Quarter 3

Par Value: 0.50
Market Cap : 1150965132*6.8 = 7,826,562,897.60 (Very Large)
NTA per share : (4126805-288883)/1139185 = 3.37
P/BV : 6.8/3.37 = 2.0178
Forecast P/E now : (6.8-0.335)/0.472 = 13.7 (Moderate)
ROE : 11.39% (Moderate)
DY : 0.335/6.8*100 = 4.93% (Moderate)
Fixed Asset Turnover(4 years) : (1.2846+1.2314+1.6596+1.6264)/4 = 1.4505 (High)
Liquidity Ratio : 4287885/2402929 = 1.7844 (Low)
Receivables Collection Period : (1030937+952975)/2/(12371939/365) = 29 days (Good)
My Target Price : 7.08+0.335 = 7.42 (PE 15, EPS 0.472, DPS 0.335)
My Decision : BUY
My Comment : Revenue and profit lower than preceding quarter, receivables still high, good cash flow, above moderate debt and increasing, automotive, equipment and manufacturing & engineering division growth largely, oil & gas division lower loss but minor impact and expect to recover
Technical Support Price : 6.7
Risk Rating : MODERATE
OSK Target Price : 8.38 (23 Nov 10)

My notes based on 2010 quarter 3 report (number in '000):-

- Group revenue for the third quarter ended 30th September 2010 surpassed the preceding year’s corresponding quarter by 10.4%. Strong consumer and business confidence continued to generate demand for our Toyota vehicles, heavy and industrial equipment as well as automotive parts

- Group profit before taxation for the third quarter ended 30th September 2010 exceeded the same quarter of 2009 by 18.3%. Higher sales of our products and services by most of our business segments and favourable foreign exchange rates accounted for the profit improvement for the quarter ended 30th September 2010

- As a result, net profit attributable to the owners of the Company for the third quarter of 2010 increased 18.7% from the same quarter of 2009

- Group revenue for the nine months ended 30th September 2010 improved over the same period of 2009 by 21.7%. Strong economic recovery, particularly in the first six months of 2010, resulted in higher demand for our Toyota vehicles, industrial and heavy equipment as well as automotive parts. However, sales of our oil & gas pipes and services were adversely affected by the slow recovery in the Oil and Gas industry

- Group profit before taxation for the nine months ended 30th September 2010 outperformed the same period of 2009 by 82.2%. Higher revenue from most of our core business segments, improved margins from favourable foreign exchange rates and model mix contributed to the profit surge. However, the antidumping and countervailing duties imposed by the United States on OCTG pipes imported from China continued to adversely affect the performance of our overseas associate, WSP Holdings Limited. Negative contribution from Naga 2 also contributed to the loss registered by the Oil & Gas segment

- Net profit attributable to the owners of the Company for the nine months ended 30th September 2010 was significantly higher than the same period of 2009, an increase of 82.1%

- Total Toyota and Perodua vehicle sales of 212,732 units represented 46.9% of the total industry volume of 453,249 units reported by the Malaysian Automotive Association for the nine months ended 30th September 2010

- Group revenue for the third quarter ended 30th September 2010 was lower than the second quarter of 2010 by 5.9%. Sale of Toyota vehicles and automotive parts declined due to shorter trading periods in the third quarter of 2010 as a result of the long Hari Raya Aidilfitri festival break

- Consequently, Group profit before taxation for the third quarter ended 30th September 2010 was 22.9% lower than the second quarter of 2010. A dip in the sales of both Toyota and Perodua vehicles mainly accounted for the reduction in profit

- Estimate next 4Q eps after 2010 Q3 result announced = 0.1311*4*0.9 = 0.472, estimate PE on current price 6.81 = 13.72 (DPS 0.335)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.1517*4*0.9 = 0.5461(0.1517 is average of recent 2Q eps, deduct 10% risk adjustment), estimate highest/lowest PE = 12.43/11.3 (DPS 0.24)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.1034*4 = 0.4136(0.1034 is average of recent 2Q eps), estimate highest/lowest PE = 15.11/14.24 (DPS 0.2)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.1016*4 = 0.4064(0.1016 is average of recent 2Q eps), estimate highest/lowest PE = 15.97/14.54 (DPS 0.2)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.0927*4 = 0.3708(0.0927 is average of recent 2Q eps), estimate highest/lowest PE = 16.94/15.29 (DPS 0.23)

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