UMW-MBM deal may fall through

KOTA KINABALU: UMW Holdings Bhd’s (UMW) MBM Resources Bhd (MBM) takeover deal may result in possible disappointment, analysts opine, given that the buyout offer of the latter’s major shareholder is expected to lapse today.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) gathered that Med-Bumikar has not responded to the offer.

MIDF Research found this unfortunate as it would have been an opportunity for MBM’s minority shareholders to exit a valuetrap.

“This also means UMW’s shareholding in Perodua will remain status quo at 38 per cent,” the research arm said.

“We also think UMW is unlikely to go through with its planned purchase of another 10 per cent Perodua stake from Permodalan Nasional Bhd (PNB), if the deal to buyout MBM falls through.

“The deal was merely an icing to our previously, contrarian ‘buy’, and the sharp price retracement in the past one month more than reflects the deal falling through, we think.

“Similarly, MBM’s share price has retraced sharply to just approximately RM2 in the past month.”

In spite of the failing deal, MIDF Research noted that UMW Toyota is targeting to regain pole position in the non-national segment over the mid-term.

MIDF Research expected the Toyota market share to hit a major inflection point in financial year 2019 forecast (FY19F) as the new Bukit Raja plant comes on-stream from the first quarter of 2019 (1Q19).

The research arm forecasted Toyota total industry volume (TIV) to rise 13 per cent year on year (y-o-y) to 81,000 in FY19F and market share to expand to close to 14 per cent from 12 per cent in FY18F.

“This is expected to be driven by the new Vios and more importantly, the all-new Yaris (Honda Jazz competitor) which fills a major gap in UMW Toyota’s model mix.

“Toyota TIV should rise further to approximately 90,000 in FY20F.”

MIDF Research further noted that unlike the previous generation Rush which was brought in as completely built up (CBU), the latest version is locally assembled, contract manufactured by Perodua.

“While pricing is more or less maintained, the new Rush is highly specced (Toyota active safety features, seven airbags).

“UMW Toyota is targeting 3,000 to 4,000 annual sales volume, four per cent to five per cent of our FY19F Toyota TIV.”

Meanwhile, MIDF Research also highlighted that both Proton and Perodua will be launching their respective sport utility vehicles (SUVs) within the next two to eight months.

“These are important models that fill up gaps in their respective model mix. UMW is one of the major beneficiaries being the largest shareholder in Perodua with a 38 per cent stake.”