KENANGA UMW - BUY - 17 Mar 2008

UMW Holdings - Launch of the new Altis (Company Update)
Price: RM5.90
Target Price: RM7.90
Recommendation: BUY


· New Altis launched. UMW introduced the new Corolla Altis on last Friday, 14 March 2008. Available in 5 variants (1.8G (Auto), 1.8G Sporty, 1.8E (Auto), 1.8E Sporty and 1.6E (Auto)) and features in 5 colours, it is a CBU unit imported from Thailand just like Camry.

· Specification and pricing. Boast a newly-designed body which will improve the aerodynamic for better fuel efficiency, higher speed stability and reduce wind noise while fitted with similar engines as the outgoing model with some technical changes. The new Altis is selling in the range of RM102,000-RM120,000 which caters mainly to customers from the higher income bracket.

· Sales performance to-date. Bookings have reached 898 units since 7 March. Management is targeting sales of at least 800 units/month which is above our expectation of 400 units/month. The new Altis competes against cars like Mitsubishi Lancer and Honda Civic.

· Expectations on the motor operation. We have assumed 86,000 units of Toyota car sales for FY08 which is at 4.4% lower than the management's target of 90,000 units. We are maintaining our numbers for now, premising on the expectation for a challenging year ahead for Toyota driven by rising competition mainly from Nissan and Honda while Perodua is expected to face strong competition from Proton Saga which has ventured into the compact car segment. Nevertheless, we remain convinced of Perodua to continue to be the auto industry's top volume seller (expect 158,900 units) for FY08 and Toyota to lead the non-national front with its strong brand name and vehicles well-represented in all segments.

· Reiterating BUY on UMW with lower Target Price of RM7.90 from RM9.00 previously based on FY08 PER of 16.0x to EPS of 49.6sen. We remain optimistic on UMW's earnings delivery underpinned by sound business management and its solidly growing O&G operations which we expect will compensate any tepid growth registered by its automotive division.