AmBank downgrades DRB-HICOM

DRB-HICOM Bhd’s shares fell one sen to RM2 yesterday following its confirmation that its subsidiary, Defence Technologies Sdn Bhd (Deftech), is being investigated by the Malaysian Anti-Corruption Commission (MACC).

The stock lost six sen, or three per cent, to RM1.95 at 9.44am before recovering to close at RM2, with 6.13 million shares traded, and valuing the company at RM3.86 billion.

Deftech, which is 100 per centowned by DRB-HICOM, manufactures, assembles and supplies military and commercial vehicles, among others.

Following the probe, AmBank Research downgraded DRBHICOM to “underweight” from “hold”, with a lower fair value of RM1.74 based on a higher discount rate of 30 per cent in its sum-of-the-parts valuation from 20 per cent previously.

The downgrade was due to potential negative sentiments arising from the arrest of the group’s executives by the MACC and the uncertainties to the group’s ability to secure future government contracts.

On Monday, MACC arrested a chief executive officer and a chief financial officer of a company for suspected corruption over a project worth RM17 million to supply equipment for military vehicles.

Both are suspected of receiving bribes amounting to hundreds of thousands of ringgit from several companies for the supply of equipment for the AV8 and Adnan armoured carriers between 2015 and 2017.

MACC also seized RM100,000 in cash and documents related to the project.

The case is being investigated under Section 16(a)(A) of the MACC Act.