MARC Ratings has removed UMW Holdings Berhad’s (UMW) sukuk programme ratings from MARCWatch Developing, where they have been placed since August 25, 2023. The rating action then was taken to assess the potential impact from the significant change in UMW’s shareholding structure following the sale of Permodalan Nasional Berhad’s (PNB) 61.18% equity stake to Sime Darby Enterprise Sdn Bhd (SDESB), a wholly-owned subsidiary of Sime Darby Berhad.
The removal from MARCWatch Developing reflects the rating agency’s assessment that matters related to the aforementioned restructuring have been completed or are nearing completion. As at date, SDESB is the direct shareholder of UMW with about 99% equity stake. UMW’s automotive business would remain largely status quo following the restructuring. The rating agency highlights that in light of the change in the shareholding structure where PNB has become an indirect shareholder with about 44% stake in UMW from being a direct majority shareholder previously, the support assessment of PNB that was previously incorporated through a one-notch rating uplift has been removed.
MARC Ratings notes UMW has continued to register strong revenue and profitability growth, strengthening its overall credit profile. During 9M2023, UMW’s revenue and pre-tax profit grew by 19.8% y-o-y to RM13.7 billion and 44.1% y-o-y to RM1.1 billion on the back of a strong performance of its automotive segment.
UMW has continued to hold the majority of market share in the domestic automotive segment over the past four years; for 2023, it had 54.8% of the total industry volume (TIV) of 799,731. Of its total sales, the Perodua and Toyota marques accounted for 41.3% and 13.5% of the TIV. While the performance of its automotive segment would normalise over the medium term, the rating agency expects UMW to continue being a leading domestic automotive player. UMW’s leverage position has improved, supported by the declining trend of its borrowings, standing at RM2.1 billion as at end-9M2023. Debt-to-equity ratio stood at 0.29x (adjusted to include 50% of its Perpetual Sukuk); UMW has remained in a net cash position since 2020.
Given these factors, the rating agency has upgraded UMW’s standalone rating to AA+IS from AAIS. Accordingly, its RM2.0 billion Islamic Medium-Term Notes Programme (Sukuk Musharakah) and its RM2.0 billion Perpetual Sukuk Programme carry ratings of AA+IS and AA-IS. The ratings outlook is stable. The outstanding under the rated programmes are RM1.25 billion and RM1.1 billion as at end-February 2024.