Thursday 28 Mar 2024
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KUALA LUMPUR (Nov 15): DRB-Hicom Bhd’s financials would be buoyed by its reduced stake in Proton Holdings Bhd, proceeds from disposals including that from Lotus group, as well as gains from improved supply chain efficiencies.

This is because the first Geely-based model, the Boyue SUV, is not expected to be in the Malaysian market for another year, RHB Research said in its note today.

“Nonetheless, with the stock still trading at a hefty discount to book and RNAV (revised net asset value), considering its significant suite of valuable assets and profitable businesses, we believe DRB-Hicom’s investment risk-reward ratio remains compelling,” the research firm said, which reaffirmed its ‘Buy’ call on the diversified conglomerate, with a target price of RM2.56.

RHB Research said DRB-Hicom is set to achieve non-recurring gains as soon as 2QFY18 (ended Sept 30, 2017), arising from the recognition of the RM1.1 billion research and development (R&D) grant as income, as well as some reversal of provisions.

However, since Zhejiang Geely Group Holding Co Ltd (Geely) only completed the acquisition of the 49.9% Proton stake on Sept 29, DRB-Hicom’s reduced share of Proton’s losses would only be reflected from 3QFY18.

“Going forward, we also see DRB-Hicom being able to enjoy some interest savings from the repayment in inter-company loans (RM570 million) by Proton and from the proceeds of the sale of Lotus (£100 million),” RHB Research said.

“We also believe that management is looking to monetise other non-core assets to pare down debt — which could include the sale of land in Johor that could bring in proceeds of over RM600 million.”

At 11.17am, DRB-Hicom fell 1.17% or 3 sen to RM1.72, with 1.07 million shares done. 

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