DRB-Hicom rises 11.7% on report of expecting 7 bidders for Proton share sale

-A +A

KUALA LUMPUR (Aug 8): DRB-Hicom Bhd shares jumped as high as RM1.24 or 11.7% after The Edge weekly reported that DRB-Hicom is expecting up to seven bids to purchase part or all of Proton Holdings Bhd, which analysts hailed as a catalyst for the conglomerate controlled by Tan Sri Syed Mokhtar Albukhary.

At 12:02pm, DRB-Hicom was up by 11 sen or 9.91% to RM1.22 with 11 million shares traded. Its intraday high was also the highest since Jan 4.

The Edge weekly reported that most of the bids had already been received with one or two more due before the mid-August deadline. Some interested suitors bandied about by sources were Volkswagen AG and General Motors Co, and one Chinese automaker — believed to be Geely Automobile Holdings Ltd.

DRB-Hicom, which owns the loss-making Proton, has had high target prices relative to its last traded price, which averaged at RM1.19. They ranged from a low of 76 sen to RM1.60.

The highest target price was ascribed by CIMB Investment Bank Bhd. The research firm said it was positively surprised by DRB-Hicom's willingness to dispose of its entire stake in Proton.

"We believe that, this time around, there is a higher chance that the sale of Proton to a foreign partner may succeed given the recent reorganisation in Proton's top level management and its need for further equity injection," said CIMB analyst Mohd Shanaz Noor Azam in a note today.

As at today, CIMB is maintaining its earnings forecasts pending further developments.

Mohd Shanaz said Suzuki Motor Corp could be a frontrunner, given its signing of a memorandum of understanding with Proton in June last year.

"DRB-Hicom's sale does not mean that Proton will be controlled by foreigners. Recall that the government has the option to take up a 79.28% stake in Proton if it opts to convert its redeemable convertible cumulative preference shares (RCCPS) that were issued as part of a RM1.25 billion loan," he said.

The Edge weekly also said any decision will have to be presented to the special task force led by Datuk Seri Idris Jala, chief executive officer of the Performance Management and Delivery Unit (Pemandu), which is monitoring Proton's turnaround.