MARC Ratings has affirmed its AA+IS rating on UMW Holdings Berhad’s (UMW) RM2.0 billion Islamic Medium-Term Notes (Sukuk Musharakah) Programme and its AA-IS rating on the RM2.0 billion Perpetual Sukuk Programme. The outlook on all ratings is stable.
The rating affirmation is premised on UMW’s continued leading market position in the domestic automotive market that translated into earnings growth, and strong balance sheet structure. These strengths are moderated by the intensifying price competition in the domestic automotive industry that could weigh on thin margins and potentially dilute market share.
For 5M2025, UMW sold 180,373 vehicles, commanding 56.9% of the total industry volume (TIV) of 316,737 units, maintaining its leading presence in the domestic automotive market (5M2024: 55.6% or 185,324 units). Its key marques remain Toyota, Lexus, and Perodua. The long established partnership with Toyota group, which holds a collective 49% interest in and has been providing technical expertise to UMW Toyota Motor Sdn Bhd (UMWT), has been a supporting factor in the continued strong performance.
For the first nine months of financial year ended 30 June 2025 (9MFY2025), the automotive segment recorded revenue and earnings before interest and taxes (EBIT) of RM10.5 billion and RM765 million. Sales performance is expected to be sustained on the back of total backlogged orders of 105,000 units as at end-May 2025 (Toyota: 15,000 units; Perodua: 90,000 units). This notwithstanding, automotive sales for UMW over the near-to-medium term is expected to moderate in view of the increased competition from foreign marques, that had captured about 9.7% of the market share in 2024. The rise in electric vehicles (EVs), which accounted for 4.4% of total TIV during 5M2025, has also added to the competitive pressure within the automotive sector, as consumers shift towards new EV offerings while benefitting from tax exemptions. Operating profit margin remains in the single digits, reflecting the competitive nature of the automotive industry.
Following the disposal of UMW’s 74% stake in UMW Komatsu Heavy Equipment Sdn Bhd in October 2024, its equipment segment recorded revenue of RM904 million and EBIT of RM78 million in 9MFY2025. In addition, UMW has further divested its 23% shareholding in the industrial equipment business to its existing partner, Toyota Industries Corporation for RM230 million. UMW remains the major shareholder, and management structure of the industrial equipment business remains unchanged. The rating agency understands that divestment of core operations is not envisaged in the near future, except for potential land disposals in Serendah, Selangor. Given the group primarily serves the domestic automotive market, impact from the US tariff implementation is minimal. Nonetheless, the group remains heedful of orders that have exposure to the US market.
The group has a combined planned capex of RM1.7 billion through 2027, mostly catering for the automotive segment to support new models, and will be funded through its strong cash balances of RM1.7 billion as at end-9MFY2025.
Group borrowings stood at RM1.3 billion, translating into a debt-to-equity ratio of 0.24x (adjusted to include 50% of the Perpetual Sukuk) as at end-9MFY2025. Additional borrowings are not expected over the near term as the group remains focused on paring down its outstanding IMTNs of RM1.25 billion maturing in 2025 and 2026; internal funds have been earmarked for this purpose. By end-FY2027, total borrowings are projected to be around RM220 million; as such, leverage would decline accordingly.