KLCI Stock - UMW / 4588 - 2010 Quarter 2

Par Value: 0.50
Market Cap : 1142216032*6.43 = 7,344,449,085.76 (Very Large)
NTA per share : (4119441-286407)/1136858 = 3.37
P/BV : 6.43/3.37 = 1.908
Forecast P/E now : (6.43-0.24)/0.5461 = 11.33 (Low)
ROE : 11.11% (Moderate)
DY : 0.24/6.43*100 = 3.73% (Low)
Fixed Asset Turnover(3 year) : (1.2436+1.406+1.6168)/3 = 1.4221 (High)
Liquidity Ratio : 4390967/2333962 = 1.8813 (Low)
Receivables Collection Period : (1001543+974522)/2/(12082314/365) = 29 days (Good)
My Target Price : 8.19+0.24 = 8.43 (PE 15, EPS 0.5461, DPS 0.24)
My Decision : BUY
My Comment : Revenue and profit increasing, good cash flow, above moderate debt and increased, navps increasing, automotive, equipment and manufacturing & engineering division growth largely, oil & gas division increased loss but minor impact and expect to recover because got contract received
Technical Support Price : 6.1
Risk Rating : MODERATE
OSK Target Price : 6.62 (15 Jul 10)

My notes based on 2010 Quarter 2 report (number in '000):-

- Group revenue for the second quarter ended 30th June 2010 improved 27.2% over the preceding year’s corresponding quarter. Overall, the progressive strengthening of consumer and business confidence continued to generate strong demand for our Toyota vehicles, heavy and industrial equipment as well as automotive parts. However, performance of our Oil & Gas segment remained adversely affected by the slow recovery in the exploration and production sector. The finalisation of contractual terms for our NAGA 2 rig took a longer time than expected. NAGA 2 will be income-generating in September 2010 instead of in April 2010 as originally anticipated

- Group profit before taxation for the second quarter ended 30th June 2010 increased 138.4% over the same quarter of 2009. Higher sales of Toyota and Perodua vehicles, favourable model mix, improved performance from the Equipment and Manufacturing & Engineering segments, coupled with favourable foreign exchange rates, accounted for the significant improvement in profit for the current quarter ended 30th June 2010. Our overseas associate, WSP Holdings Limited, has reported an overall improvement in both domestic and international sales and a lower loss for the second quarter of 2010. The company has successfully secured new overseas customers in Russia, Uzbekistan and South America although sales to North America has not improved due to countervailing duties on seamless pipes made in China

- Total Toyota and Perodua vehicle sales of 143,721 units represented 47.7% of the total industry volume of 301,077 units reported by the Malaysian Automotive Association for the six months ended 30th June 2010

- Group revenue for the second quarter ended 30th June 2010 was 8.2% higher than the first quarter of 2010. Stronger demand for our Toyota vehicles as well as the industrial and heavy equipment mainly accounted for the revenue improvement

- Group profit before taxation for the second quarter ended 30th June 2010 was 45.0% above the recorded in the first quarter of 2010. Higher sales volume, improved margins from favourable foreign exchange rates and lower loss incurred by our overseas associate resulted in the higher profit

- 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 PE on current price 6.43 = 11.33 (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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