KUALA LUMPUR (April 21): Oriental Holdings Bhd rose as much as 5.6% on news the firm is in talks with Proton Holdings Bhd to set up a Proton dealership business.
The discussions have been ongoing for a considerable period, which “the two are close to inking an agreement”, The Edge Weekly quoted a source this week.
At 2.42 pm today, Oriental (fundamental: 2.5; valuation: 2) gained 35 sen or 5% to RM7.32. The second top gainer on Bursa Malaysia saw trades of 330,900 shares. It had earlier hit a high of RM7.36.
In a note today, CIMB Investment Bank Research viewed the development “positively”, as it believes Oriental will be a reliable partner.
With Proton lacking big 3S (sales, service and spare parts) centres, the research house said Oriental has the financial strength and industry experience to develop Proton’s 3S dealerships in the most efficient way.
“It fits well into Proton’s long-term strategy,” said CIMB IB analyst Azman Hussin.
“We are positive on the potential partnership, as Oriental is a respected name in the local automotive industry.”
Previously, the firm was the licensed distributor of Honda and certain Hyundai models in the country. It still has dealerships for Hyundai, Honda and Mitsubishi vehicles.
Oriental also has a growing oil palm plantation business in Indonesia, which has since become a major earnings contributor.
From a technical perspective, Oriental has today broken past three resistance levels of RM6.98, 7.03 and RM7.07, as indicated by Kenanga Research in a note today. Its immediate support level was seen at RM6.89.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)