KUALA LUMPUR (Oct 30): RHB Research Institute Sdn Bhd has upgraded UMW Holdings Bhd to a "buy" (from "neutral") on the back of the upcoming release of the group's third quarter results which is likely to show sequential improvement.

In a note today, the research house maintained its target price of RM5.59 for the stock.

"We estimate revenue and net profit of RM3.1 billion and RM95 million (respectively) on higher Toyota and Lexus sales volumes — boosted by the tax free window — despite lower Perodua sales. The autoparts business should also benefit from the demand spike. A raft of new model launches in the coming months should help boost 2019 sales," it said.

UMW Toyota recently launched the all-new Toyota Rush, which will be competing against the Honda BR-V within the seven-seater B-segment SUV market. While the all-new Toyota Camry is scheduled for a Nov 1 launch.

"The Camry accounted for 5% of Toyota's sales. In the pipeline: we expect UMW to introduce the all-new Toyota Vios sedan and Yaris hatchback. The highly anticipated Perodua SUV is set to be introduced in 1QFY19. This refreshed product line-up should be able to fuel UMW's auto segment in 2019," said RHB Research.

The "buy" call is also supported by re-emerged value of the stock after a 24% share price correction in the past six months which had priced in the weak ringgit. "We believe UMW is worth accumulating at current levels," it said.

At 10.11am, UMW shed 0.43% or 2 sen to RM4.63 with 26,900 shares done.