UMW has a disappointing 1Q2009

UMW has just announced its results for 1Q2009 ended 31/3/2009. Its net profit plummeted by 43% q-o-q or 54% y-o-y to RM66 million while turnover dropped by 19.5% q-o-q or 21.3% y-o-y to RM2.35 billion. The lower turnover was attributable mainly to lower sales of Toyota vehicles & heavy equipment. This together with higher cost of sales (resulting from the strengthening of the Japanese Yen and the US Dollar), plus lower profit contributions from our associated companies, led to sharply lower bottom-line for UMW.


Table 1: UMW's past 8 quarterly results

From Table 2 below, we can see the segmental results for 1Q2009 & FY2008. The sharp drop in the segmental results for the automotive division is the main factor dragging down UMW's performance for 1Q2009 & probably for the rest of FY2009.


Table 2: UMW's segmental results for 1Q2009 & FY2008

UMW (closed at RM5.80 yesterday) is now trading at a trailing PE of 13 times (based on last 4 quarters' EPS of 45 sen). On the other hand, if you assumed that UMW's financial performance for FY2009 to be similar to the average of the past 2 quarters' results (with EPS for 1Q2009 & 4Q2008 totaling 17 sen), then UMW's EPS for FY2009 could be about 34 sen. This means that UMW is trading at 17 times its projected earning for FY2009. At this multiple, UMW appears fully-valued.

UMW's share price appears to have bottomed, but its uptrend has not gathered strength. If one were to position for a recovery play, the a good entry level is at RM5.50-60.


Chart: UMW's weekly chart as at 20/5/2009 (Source: Quickcharts)

UMW could be a good stock for long-term investment, based on its historical performance and slowly improving technical outlook.