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KOTA KINABALU: Due to the share price retracement and optimism on Proton’s strategic partnership with Geely, as well as better cost management, analysts have upgraded their forecast and ratings for DRB-Hicom Bhd (DRBHicom).
In a recent report, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) said, it upgraded its call from ‘market perform’ to ‘outperform’ due to the share price retracement and optimism on Proton’s strategic partnership with Geely.
It noted that Proton is in the midst of finalising a 10-year business plan targeting 30 per cent share of the domestic market and 10 per cent of regional markets via introduction of new models.
Specifically, it said, the group is targeting to expand its products portfolio in the A, B, SUV and MPV segments for their export market.
Meanwhile, it noted that a new manufacturing plant in Tanjung Malim is expected be ready in five years’ time, but the first Proton car made with Geely’s technology is expected to be rolled out by 2019.
“Geely will facilitate Proton in terms of technology and at the same time assemble its four-wheel drive model, intelligent artificial car and develop their right-hand drive technology in Malaysia known as the Boyue.
“Proton’s first sport-utility vehicle (SUV) model, based on Geely’s Boyue platform is on track to roll out in the fourth quarter of 2018 (4Q18). The first batch is expected to be China-built, while the complete knocked-down (CKD) version will come somewhere in the second half of 2019 (2H19),” Kenanga Research said.
Onitsfinancialperformance,the research arm of AmInvestment Bank Bhd (AmInvestment) said ut has adjusted its financial year 2019 (FY19) to FY21 earnings forecast upwards on stronger sales for its non-auto segments and better cost management.
It said, “In FY18, DRB-Hicom saw revenue improve six per cent year-on-year (y-o-y) and its bottom line swing to a net profit of RM499 million from a loss of RM460 million.
“It still registered a core net loss after accounting for exceptional items (namely the RM1.1 billion grant Proton received for R&D). Core net loss shrank to RM66 million from RM352 million in the previous year.”
Nevertheless, it pointed out that revenue improved as a drop in Proton sales was mitigated by stronger topline from the services and property segments.
“Services benefited from the consolidation of Pos Malaysia as a subsidiary from 2H17 and a slight growth in concession earnings (from Alam Flora). Property saw a higher recognition from projects by Northern Gateway Infrastructure and Media City,” it highlighted.
It also noted that the smaller core losses seen in FY18 were due to the sharing of Proton losses with Geely and stronger topline.
“We believe DRB-Hicom stayed in the red due to persistent losses from Proton, a drop in the profitability of its property segment (profit before tax plunged 80 per cent y-o-y despite the massive topline expansion) and continuing losses from its investment holding segment (which we believe holds the group’s other non-core assets; pre-tax losses here have exceeded RM200 million per year),” it added.