This article first appeared in The Edge Financial Daily on March 13, 2019

UMW Holdings Bhd
(March 12, 5.70)
Maintain buy with an unchanged target price of RM7: We attended a site visit to Toyota Plant 2 in Bukit Raja, Klang organised by UMW Holdings Bhd. We left feeling upbeat about the group’s rationalisation plan towards its automotive segment.

Bukit Raja Plant (BRP) is owned by Assembly Service Sdn Bhd (ASSB), a subsidiary of UMW Toyota Motor Sdn Bhd. BRP’s size is 2.6 times bigger than Shah Alam Plant (SAP) with production capacity of 50,000 units (SAP: 38,000 units).

The plant consists of a few shops namely welding shop, paint shop, assembly shop and quality control shop. These shops are specifically referred to process of welding, painting, assembly and inspection. The plant is currently running on two shifts of high automation, around 43% compared with SAP’s 23%. Welding and paint shops are running with a high level of automation process compared with others since every shop has different degree of automation. Looking forward, ASSB expects welding and paint shops’ automation to increase in the future to cater for the rising demand.

The plant’s set-up is able to accommodate up to C segment car platform. At the moment, the group is focusing on two models — the new Toyota Vios and Toyota Yaris — with 50,000 units of production capacity. Local content for the new Vios has improved to 80% (from 58% previously), resulting in a better margin for the group. Besides, Yaris is also expected to have similar localisation rate and will be assembled at the plant starting from April. We understand that the plant is currently operating above break-even level following the massive demand of the new Vios.

Looking forward, we expect the group to focus on its three core businesses which will resume its growth momentum over the medium to longer term. — JF Apex Securities, March 12