KUALA LUMPUR (May 2): MIDF Research maintains a “buy” call on UMW Holdings Bhd and MBM Resources Bhd (MBMR) at an unchanged target price of RM5.28 and RM4.70 respectively, following Perusahaan Otomobil Kedua Sdn Bhd (Perodua)’s clarification that Perodua Axia remains safe for driving.
On April 28 (Friday), Daihatsu Motor Co Ltd (Daihatsu) had confirmed that it had committed “procedural irregularity” on the Japanese firm’s side collision impact safety testing for four models,including the new Perodua Axia.
The other three models were Toyota Agya, Toyota Yaris Ativ, and an undisclosed upcoming product.
However, MIDF in a note on Tuesday (May 2) said Perodua’s clarification should provide some relief to investors and could present an opportunity to buy.
MBM Resources Bhd (MBMR), which is an automotive trader and parts manufacturer that also supplies Perodua vehicles, fell almost 2% on April 28.
“[This] could have been influenced by Daihatsu’s revelation on the incident and the resultant concerns on the recently launched Perodua Axia.
“The latest positive developments following the incident should provide some relief to investors and could present an opportunity to buy on dips, in our opinion,” the research outfit said.
The stock now trades at 5.7 times FY23 PER, a 25% discount to historical mean, and at current price, entails an attractive 7% dividend yield (FY23F: 40% dividend payout).
Perodua’s management explained that despite the revelation by Daihatsu, the UN-R95 certification accorded to Perodua Axia remains intact, based on its engagement with the relevant safety testing authorities and agencies, following the news.
“As such, no recall will be issued, nor will there be a halt in production of the Axia,” MIDF added.
Perodua Axia attained a 4-star ASEAN NCAP rating during its test conducted in January 2023. The UN-R95 is one of the tests required to be carried out, specifically, in terms of passenger safety in the event of a side collision, whereby it is a pre-requisite for a 3-star (and above) ASEAN NCAP rating.
A similar statement was issued by UMW on the Toyota Vios, highlighting that subsequent testing has validated that the Vios meets the UN-R95 certification and there is no need for the model to be recalled, while sales and production will continue without disruption.
Daihatsu Motor’s “procedural irregularities” in regard to the side collision impact safety testing for the four models, arose from the addition of a “notch” to minimise the risk of door panels breaking into sharp edges and causing injuries when the side airbag is deployed, whereby the modification is not present in production vehicles.
According to Daihatsu, of the 88,000 units affected, the majority 76,000 is reported to be the Yaris Ativ bound for Thailand, Mexico and the Gulf Cooperation Council countries.
Daihatsu also announced that production and sales of the affected models will be halted until a re-inspection is done in the presence of inspection and certification authorities.
UMW shares closed 0.78% or three sen lower to RM3.84 on Tuesday, valuing the company at RM4.49 billion; while MBMR shed 1.67% or six sen to RM3.53, giving the company a market capitalisation of RM1.38 billion.