UMW HOLDINGS BHD

By MIDF Research Buy (maintained) Target price: RM7.11

MIDF Research has reaffirmed its “buy” call on UMW Holdings, which is looking to acquire MBM Resources Bhd.

MBM Resources owns a 20.58% stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

The research house quoted a StarBiz article, which stated that MBM’s Japanese partner in Perodua, Daihatsu, is not in favour of UMW Holdings taking an overwhelming stake in the largest and most profitable local carmaker.

The research house noted that shareholding for the Malaysian side essentially involved only two shareholders, which are Permodalan Nasional Bhd, which holds 10% via PNB Equity Resources Corp Sdn Bhd (PERC) and another 38% via UMW Holdings; and MBM Resources, with a 20% stake and another 5% via its subsidiary Daihatsu Malaysia Sdn Bhd.

“It is quite difficult to avoid one party essentially having a controlling stake if a sale is to be passed around, essentially, between two parties. We read this as the Japanese partners’ preference for a status quo on the existing shareholding,” it said.

The research house added that it was uncertain if UMW Holdings had approached Daihatsu Motors and Mitsui to convince these partners on its move to consolidate its position in Perodua, but noted that UMW Holdings, in its announcements, had stated its intention to do so.

UMW Holdings has proposed to acquire PERC’s 10% stake in Perodua.

The research house said its sumof-parts and forecasts only factored in the 10% Perodua stake acquisition from PERC, “as this looks like the only firm deal at this point”.

It said there would be further potential upside if UMW Holdings proceeded with its takeover of MBM, depending on the offer price and how it is financed.