KUALA LUMPUR (Dec 3): UMW Holdings Bhd surged as much as 6.14% this morning after the company reported it returned to profitability in the third quarter ended Sept 30, 2018 (3QFY18). 

On Nov 30, UMW announced it posted a net profit of RM128.13 million in 3QFY18 compared with a net loss of RM29.37 million a year earlier. Quarterly revenue rose 25% to RM3.29 billion from RM2.64 billion in 3QFY17.

In a filing with Bursa Malaysia, UMW said the improved performance was due to better contributions from its core businesses, including its automotive segment and aerospace segment. 

At 10.54am, the counter jumped as much as 31 sen to RM5.35, valuing the company at RM6.26 billion

RHB Research Institute Sdn Bhd, which has set a higher target price of RM5.70 (from RM5.59 previously) and maintained its “Buy” call on UMW, wrote in a note today, saying: “UMW’s 9M18 earnings are above expectations, with core net profit of RM325.2 million at 91% and 90% of our/Street FY18F. The positive surprise was mainly attributed to better-than-expected numbers from its auto earnings, despite disrupted production at Perodua during the quarter.” 

The research house expects the new car model launches to be the key revenue driver for UMW, together with the strengthening of the ringgit against the greenback, which will also help bolster its margins. 

“We lift FY18F earnings by 14% to reflect the better-than-expected performance of its auto division during the tax holiday, which is a one-off event. We also nudge up our FY19-20F net profit by 2% and 3.7% after updating our forex assumption for the MYR/USD to strengthen,” according to the report.