The slump in the oil and gas sector plus a declining automotive business has taken a heavy toll on UMW Holdings. According to RHB Research’s latest Malaysia Strategy report for May 2016, the steep drop in market value could see UMW Holdings dropped from FTSE Bursa Malaysia’s Kuala Lumpur Composite Index (FBM KLCI) – Malaysia’s headline index that tracks the top 30 stocks in the country by market capitalisation.
According to the ground rules of FBM Index Series, a security will be deleted if its market capitalisation ranking of eligible securities drops to 36th or below, while a security will be added to the FBM KLCI at the periodic review if its ranking by full market value rises to 25th or higher.
Over the last 12-month period, UMW’s market value has dropped by 47 percent.
Hap Seng Consolidated, which RHB says is the largest of the five names on the reserve list, is likely to replace UMW Holdings as a component stock.
Hap Seng Consolidated is a diversified conglomerate whose core businesses include plantations, property development and investment. You readers however, will most likely know Hap Seng for its Mercedes-Benz dealership business.
Automotive is the largest contributor for UMW Holdings’s revenue, contributing over 70 percent of the company’s RM2.2 billion in revenue collected in the first quarter of 2016. UMW has a controlling stake in Perodua, as well as in the distribution of Toyota and Lexus vehicles in Malaysia.