KUALA LUMPUR (Feb 22): CIMB IB Research has downgraded UMW Holdings Bhd to “Hold” (from Add) at RM5.45 with a higher target price of RM5.50 (from RM5.10) and said UMW’s management expects to incur major impairment related to its oil and gas assets in the upcoming 4Q16 results as part of the group’s initiative to exit the business.

In a note yesterday, the research house said UMW plans to complete the disposal of the non-listed oil and gas assets by end-2017.

“We expect gradual earnings recovery for UMW in FY17 in view of sluggish demand in automotive segment and potential earnings drag from oil & gas in 1H17.

“We raise our FY17-19F EPS by 9% to reflect higher automotive contribution from upcoming new model launches in 2H17 and better margins for M&E division.

“However, we see limited upside to share price as the stock is up 18% mom. Hence, we downgrade the stock to Hold with a higher RM5.50 target price,” it said.