Beyond Boundaries UMW Holdings Berhad 19 March 2018 GAME CHANGER - - PowerPoint PPT Presentation

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Beyond Boundaries

UMW Holdings Berhad

19 March 2018

GAME CHANGER

Consolidation of equity stake in MBM Resources and PERODUA

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AGENDA

• 1. TRANSACTION RATIONALE
• 2. THE VALUE PROPOSITION
• 3. PROPOSED RIGHTS ISSUE
• 4. MOVING FORWARD

UMW HOLDINGS BERHAD

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Transaction Rationale

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CONTINUED EXPANSION OF OUR BUSINESS Our Strategy Towards Growth

AUTOMOTIVE Enhancing and

• ptimizing profitability

M&E Continued expansion

• f core business and

HVM EQUIPMENT Strengthening of heavy and industrial equipment segment

UMW HOLDINGS BERHAD

GAME CHANGER – Mergers & Acquisition strategy

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TRANSACTION OVERVIEW

10.0%

(3) 10% stake in Perusahaan Automobil Kedua Sdn Bhd (“PERODUA”) for a purchase consideration of RM 418m from PNB Equity Resources Corporation (“PERC”)

50.07%

(1) 50.07% stake in MBM Resources Berhad (“the Company” or “MBMR”) for a purchase consideration of RM 501m

The proposals :-

49.93% 3%

(2) Mandatory general offer (MO) will be made to the remaining shareholders of the Company of RM 499m

MBM Resources Perodua

+

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GROUP STRUCTURE BEFORE AND AFTER THE PROPOSALS

As at 6 March 2018(1)

UMWH MBMR Perodua PERC 38.0%(2) 20.0% 10.0% DMSB* 5.0% 51.5% 100.0%(4) UMWH(3) Perodua MBMR DMSB* 48.0% 20.0% 5.0% 51.5%

*DMSB – Daihatsu (M) Sdn Bhd Notes: (1) Being the latest practicable date prior to the date of the MBMR offer letter (2) Held through UMW Corporation Sdn Bhd, a wholly-owned subsidiary of UMWH (3) UMWH reserves the right to nominate another affiliate(s) to undertake the Proposed MBMR Acquisition and the Proposed Perodua Acquisition (4) 100% ownership of MBMR is dependent on the outcome of the Proposed MO

After the Proposals

Increasing our strategic stake in Perodua

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RATIONALE AND BENEFITS – PROPOSED ACQUISITIONS

Increase strategic stake in Perodua

• Effective interest in Perodua will increase from 38.0% to 60.6% after completion of the

Proposed MBMR Acquisition and assuming full acceptance of the Proposed MO

• Further increase to 70.6% after the completion of the Proposed Perodua Acquisition

1 Increase exposure in the commercial vehicle segment

• Assimilating MBMR’s multi-brand dealerships i.e. Daihatsu and Hino vehicles

2 Widen our offerings in the manufacturing segment

• Integrating MBMR’s auto parts manufacturing business – wheels

manufacturing, safety products and noise, vibration and harshness products 3 Improve prospects in the automotive segment

• Leveraging on Perodua’s strength in the national car segment, coupled with the

Company’s existing presence in the non-national car segment via the Toyota marque

• Benefit from economies of scale and create synergies

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The Proposed Acquisitions are consistent with our strategy to enhance our core businesses

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The Value Proposition

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57 148 91 MBMR ex-Perodua Net debt at MBMR company level

• Adj. equity Value
• f

MBMR ex-Perodua 418 944 1,001 57 10.0% stake in Perodua 22.6% stake in Perodua MBMR ex-Perodua MBMR Offer Price

THE OFFER PRICE FOR PERODUA AND MBMR

• Equity value of remaining businesses at MBMR

(ex-Perodua) estimated at RM148 million ‒ Includes the loss-making alloy wheels segment

Valuation Build-up Exposed to holding company debt and business risks of MBMR Group

• Offer price for Perodua reflects a c.9.0x earnings multiple over Perodua’s 2016 audited net income of

RM463.6 million

RM million RM million

Note: (1) Rounded from the offer price of RM2.56 per MBMR Share Financials in this section are based on MBMR’s and Perodua’s audited 2016 financials, including the net debt at MBMR company level Source: Bloomberg as at 14 March 2018 (1)

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• 1.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 1.40 1.60 1.80 2.00 2.20 2.40 2.60 2.80 3.00 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 Offer Price of

MBMR OFFER PRICE IS A PREMIUM TO HISTORICAL PRICES

Close to Last 2 Years Historical High

Note: (1) VWAP up to and including 6 March 2018, being the last trading day prior to the date of the MBMR Offer Source: Bloomberg as at 14 March 2018

Historical Prices(1) Premium 5-day VWAP RM2.26 13.3% 1-month VWAP RM2.28 12.3% 3-month VWAP RM2.30 11.3%

MBMR Share Price (RM) Volume (units ‘mn)

Submission of offer 7 March 2018

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FUNDING REQUIREMENTS

RM 1,072 million RM 418 million

RIGHTS ISSUE* INTERNAL FUNDS + UMW SHARES

• Amount raised via the Rights Issue

(RI) would depend on the cash or shares option selected by MBMR’s minority shareholders as payment

• Pending the RI, UMW undertakes

bridging facility to fund the deal

• Includes about RM 71m transaction

and other costs

100%

MBM Resources Perodua

10.0%

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Proposed Rights Issue

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DETAILS OF THE PROPOSED RIGHTS ISSUE

Gross proceeds

• Subject to fixing of the entitlement basis and issue price at a later date

Issue price

• To be fixed at a later date but for illustration purposes:

For this illustration, the TERP is calculated based on the 5-day VWAP of UMWH Shares up to and including 12 March 2018(1) of RM6.04 Entitlement basis

• To be fixed at a later date but for illustration purposes:

Shareholders’ irrevocable undertaking

• The Company intends to seek irrevocable undertaking from Permodalan Nasional

Berhad (“PNB”) and the funds managed by PNB to subscribe in full their respective entitlements Underwriting arrangement

• The Company intends to procure underwriting arrangement(s) for the remaining rights

shares for which no undertaking has been obtained Use of proceeds

• Primarily to repay the Bridging Facility to be obtained by the Company

Illustrative – To be determined at a later date closer to the implementation of the Proposed Rights Issue to enable the price to be more reflective of the prevailing market price at that time

Full Cash Scenario RM1,072 million Full Shares Scenario RM559 million Full Cash Scenario RM4.40 per rights share (23.7% discount to TERP) Full Shares Scenario RM4.30 per rights share (26.9% discount to TERP) Full Cash Scenario 1 rights share for every 5 UMWH Shares Full Shares Scenario 1 rights share for every 10 UMWH Shares

TERP – Theoretical ex-rights price Notes: (1) Being the last trading day prior to the announcement of the Proposed Rights Issue on 13 March 2018

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RATIONALE – PROPOSED RIGHTS ISSUE

Repayment of the Bridging Facility 1 Improve financial flexibility

• Optimise the Company’s capital structure
• Further strengthen capital base to reflect the enlarged operations

following the Proposed Acquisitions 2 Opportunity to further increase equity participation in the Company

• Opportunity to further increase equity participation on a pro-rata

basis at a discount to the prevailing market price of UMWH Shares

• No dilution to equity interest, provided that all entitled shareholders

fully subscribe their respective entitlements to the rights shares 3

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PROFORMA BALANCE SHEET AND GEARING

The Proposed Rights Issue will strengthen our capital base to reflect our enlarged

• perations following the Proposals

Full Cash Scenario Full Shares Scenario Pro forma I Pro forma II Pro forma III(a) Pro forma IV(a) Pro forma III(b) Pro forma IV(b) Audited as at 31 Dec 2016 After the Completed Transaction(

1)

After the Proposed MBMR Acquisition(2

)

After Pro forma I and the Proposed Perodua Acquisition(2)(3

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After Pro forma II and the Proposed MO(4) After Pro forma III(a) and the Proposed Rights Issue After Pro forma II and the Proposed MO(4) After Pro forma III(b) and the Proposed Rights Issue (RM ‘000) (RM ‘000) (RM ‘000) (RM ‘000) (RM ‘000) (RM ‘000) (RM ‘000) (RM ‘000) Shareholders Funds 4,718,562 3,458,395 3,682,529 3,982,529 4,206,036 5,245,484 4,705,671 5,242,467 Non-controlling interests 2,145,713 1,144,679 2,134,405 2,134,405 1,411,263 1,411,263 1,411,263 1,411,263 Total equity 6,864,275 4,603,074 5,816,934 6,116,934 5,617,299 6,656,747 6,116,934 6,653,730

• No. of UMWH

Shares in issue (‘000) 1,168,294 1,168,294 1,168,294 1,217,555 1,217,555 1,461,066 1,299,526 1,429,479 NA per UMWH Share 4.04 2.96 3.15 3.27 3.45 3.59 3.62 3.67 Total borrowings 6,355,106 2,582,588 3,453,247 3,453,247 3,952,882 2,952,210 3,453,247 2,952,210 Gearing (times)(5) 1.35 0.75 0.94 0.87 0.94 0.56 0.73 0.56

Notes (1) Adjusted to illustrate the effects of the distribution of 1,204,777,400 ordinary shares in UMW Oil & Gas Corporation Berhad (“UMW-OG”), being the entire shareholding of UMWH in UMW-OG. (2) Assuming that the carrying values of MBMR and Perodua are equivalent to its fair value for illustrative purposes. (3) Assuming that Perodua continues to be equity accounted from accounting perspective despite the increased stake for illustrative purposes. (4) Assuming full acceptance under the Proposed MO. (5) Calculated as total borrowings divided by equity attributable to owners of the Company.

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Moving Forward

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KEY TAKEAWAYS

• Upon completion of the transactions, we will continue to evaluate strategic
• ptions that will put the Company in a better position to grow its businesses

and enhance shareholder value.

• We believe that the offer price is fair, which is a premium of more than 13%

and the offer is higher than historical prices - for the most of the last 12 months.

• Existing shareholders of UMWH who do not subscribe to the RI - may

experience earnings dilution but this would be mitigated by the immediate earnings accretion following the consolidation of the two businesses.

• The minority shareholders of MBMR - will have the choice of having a cash
• ffer, or an equivalent UMW share offer. Those who wish to remain invested

in the automotive sector will have the option to invest in UMWH instead, and will benefit from the liquidity of our shares and potential growth of the UMW Group.

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MOVING FORWARD

HARNESSING ON OUR STRENGTH

Leveraging on MBM Resources and UMWH strength and expertise to drive the Group’s automotive segment. Market leadership aspirations to drive value in both passenger and commercial vehicles segments. Broadening of our product offering.

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ENHANCING MANUFACTURING CAPABILITIES

Strengtening our manufacturing and engineering capabilities in terms of auto-parts manufacturing. UMWH’ capabilities with KYB- UMW and MBM Resources’ parnership with Hiratako and Autoliv would enhance our market position in terms of auto-parts.

DEVELOPING GROUP SYNERGIES

Enhancing distribution and after sales services for the consolidated Group opens cross selling opportunities such as lubricants as well as replacement auto-components market.

PROPOSED CONSOLIDATED AUTOMOTIVE GROUP ARE ABLE TO DRIVE GROWTH IN VARIOUS SEGMENT OF THE AUTOMOTIVE BUSINESS

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THANK YOU

UMW HOLDINGS BERHAD