ANALYSTS UPBEAT ON DRB-HICOM

Geely partnership will give subsidiary Proton real chance of reclaiming glory

ANALYSTS remain confident of DRB-HICOM Bhd’s prospects despite it delivering a lower-than-expected financial results on Tuesday.

Hong Leong Investment Bank (HLIB) Research, in its note yesterday, said DRB-HICOM reported core loss of RM245.9 million for the fourth quarter (Q4) of this year and RM525.4 million for the full year, worse than its loss expectation of RM323.6 million and consensus loss of RM350.6 million for the year.

It said DRB-HICOM’s performance was mainly dragged down by losses at Proton, including Lotus.

It was reported that Proton recorded losses of RM1.5 billion in financial year 2016 and RM1 billion this year.

HLIB said excluding Proton, DRB-HICOM would have reported profits of RM455.5 million in financial year 2016 and RM533.2 million this year.

It said with the emergence of Geely as strategic foreign shareholder for Proton, investors can expect re-rating catalyst on DRBHICOM’s valuation.

HLIB has maintained its “buy” call on the group with an unchanged target price of RM2.58.

RHB Research said while DRBHICOM’s results were below expectations, it did not expect the historical earnings to have material implications for its prospective price performance.

“The recent signing of the heads of agreement with Zhejiang Geely for the sale of a 49.9 per cent stake in Proton has focused market expectations on the completion of the sale and execution of the rehabilitation plan.

“We reiterate our view that the partnership with Geely would provide Proton with a real chance of reclaiming its former glory,” it said.

RHB Research reiterated its “buy” call on DRB-HICOM with lower target price of RM2.67 from RM2.77 previously.