MARC Ratings has affirmed its ratings on UMW Holdings Berhad’s (UMW) RM2.0 billion Islamic Medium-Term Notes Programme (Sukuk Musharakah) at AA+_IS and RM2.0 billion Perpetual Sukuk Programme (Perpetual Sukuk) at AA-_IS. The ratings outlook is stable. 

UMW’s sizeable market share in the domestic automotive industry, strong revenue generation and healthy capital structure remain key rating drivers. The ratings also incorporate parental support from Permodalan Nasional Berhad, a government-linked investment company. The key moderating factors to the ratings are the intense competition in the industry that has weighed on margins, and potential disruption to its automotive production from global supply chain disruptions. 

UMW accounted for a substantial 52.3% of the total industry volume of 331,386 vehicles sold in the country in 1H2022 (end-2021: 51.6%). Its key marques, Perodua, Toyota and Lexus, cater for the mass-, mid- and up-market segments, underscoring UMW’s competitive strength in its ability to offer models of different price ranges. For 1H2022, in addition to benefitting from a tax holiday, sales were supported by the facelift of the Perodua Myvi and the all-new Toyota Corolla Cross models. For 2022, UMW is on track to meet its sales target of 320,800 units, supported by backlog orders totalling 280,000 units as at date. We note that while domestic automotive players have to contend with component shortages, the impact on UMW has been manageable as to date due to its collaboration and coordination with domestic and regional suppliers.

UMW also recorded improved performance in its industrial and heavy equipment segments in 2021, mainly through the sales and leasing of Toyota forklifts and Komatsu heavy equipment on the resumption of economic activities. Nonetheless, its automotive segment remains key to the group, accounting for 81% of group revenue in 2021. For 1Q2022, group revenue and pre-tax profit rose by 23.6% y-o-y to RM3.7 billion and 34.3% y-o-y to RM255.3 million. The performance is expected to be sustained for the year on the back of stronger economic growth and improvement in consumer sentiments.

As at end-March 2022, total borrowings (including 50% of the Perpetual Sukuk) stood at RM3.2 billion. With the redemption of RM750 million sukuk in mid-April 2022, debt-to-equity ratio is projected to decline to about 0.40x as at end-June 2022 from 0.50x. The group has a sizeable cash balance of RM3.5 billion as of end-March 2022. Its planned capex of RM800 million for 2022 and an average of RM430 million p.a. for 2023-2025 is expected to be funded internally. The capex will mainly be for new car launches and purchase of rental equipment.

Contacts:

Lim Wooi Loon, +603-2717 2943/ wooiloon@marc.com.my
Cyndy Goh, +603-2717 2941/ cyndy@marc.com.my
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my