KUALA LUMPUR (Oct 19): DRB-Hicom Bhd is in analysts' good books on expectation of DRB-Hicom's 50.1%-owned subsidiary Proton Holdings Bhd's revamp. This followed Zhejiang Geely Holding Group Co Ltd's acquisition of a 49.9% stake in Proton.

CIMB Investment Bank Bhd and Hong Leong Investment Bank Bhd wrote in separate notes today that DRB-Hicom is expected to benefit from the Proton-Zhejiang Geely partnership.

CIMB analyst Mohd Shanaz Noor Azam said CIMB likes "DRB-Hicom for its exposure to the Proton-Geely partnership".

Hong Leong analyst Daniel Wong said: "With Geely as Proton’s foreign strategic partner, Proton will be leveraging on Geely’s technology, skill set and financial muscle for turnaround. Proton will introduce new SUV (sport utility vehicle) model, based on Geely Boyue in 2H18."

CIMB and Hong Leong's notes followed the Malaysian Automotive Association's (MAA) September 2017 industry numbers announcement on Monday. 

The MAA said the country's September vehicle sales declined 14.8% to 40,981 units from a year earlier. Cumulative nine-month vehicle sales rose 1.8% to 
425,711 units from a year earlier.

Today, CIMB and Hong Leong said they expect a recovery in Malaysia's vehicle sales in the fourth quarter.

CIMB's Mohd Shanaz said: "Although 9M17 TIV (total industry volume) only made up 71% of our full-year TIV forecast of 597k, we keep our projection, as we expect higher sales volumes in 4Q17F, especially in December, driven by seasonally stronger demand due to wider discounts, as dealers try to reduce their inventories ahead of the New Year. Historically, 4Q sales have formed about 26%-28% of full-year TIV (2012-2016)."

Hong Leong's Wong said: "The sector is expected to experience gradual recovery from normalising of consumer sentiments, while remain affected by the weak ringgit in 2017 (impact on cost structure and margins)."