Oriental to distribute Mitsubishi vehicles

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KAH MOTOR Co Sdn Bhd, a wholly owned unit of Oriental Holdings Bhd, has secured a distributorship for Mitsubishi vehicles in Malaysia.

While it is not confirmed as yet, some industry sources say it may be a super dealer of the brand.

In a reply to an email query by The Edge, an executive, representing managing director Datuk Robert Wong Lum Kong, says, “Please be advised that we are a dealer of Mitsubishi Motors vehicles in Malaysia.” This indicates that the appointment has already been made.

The Kah Motor executive did not comment on other questions posed.

Some industry sources say the distributorship could see a resurgence of Kah Motor in the automotive industry. The company used to be the sole distributor of Honda vehicles in the country, but lost the franchise in 2000.

Oriental, DRB-Hicom Bhd and Honda of Japan are partners in Honda Malaysia, which assembles Honda cars in Alor Gajah, Melaka. Honda has a 51% stake in the joint venture while DRB-Hicom and Oriental have 34% and 15% interest respectively.

Oriental fell further from prominence after it sold its 60% stake in South Korean carmaker Hyundai’s franchise to Sime Darby Bhd for RM19.8 million in 2009. The company still has dealerships and assembly operations that do not appear to be very lucrative.

Some sources, however, say current Mitsubishi distributor DRB-Hicom will still hold on to the money-spinning portion of the distributorship, that is, the supply of cars to government departments and the police force.

Checks on the web reveal that the police use Mitsubishi models such as the Lancer GTS 2.0, Lancer Evolution X and Pajero Sport 2.5 VGT.

Mitsubishi Motors Sdn Bhd, which distributes and trades Mitsubishi vehicles, spare parts and accessories, registered an after-tax profit of RM23 million on slightly over RM1 billion in revenue in its financial year ended March 30, 2014.

According to the Companies Commission of Malaysia, Mitsubishi Corp of Japan holds a 52% stake in Mitsubishi Motors while Edaran Otomobil Nasional, a wholly owned unit of DRB-Hicom, holds the remaining 48%.

According to the Malaysian Automotive Association, 12,348 Mitsubishi vehicles — 5,285 cars and 7,063 commercial vehicles — were sold last year, giving the carmaker a 1.9% market share and making it No 6 in terms of the number of vehicles sold. (In 2013, the total number of vehicles sold in Malaysia was 655,793.)

Kah Motor, meanwhile, posted an after-tax profit of RM76.5 million on the back of revenue of RM1.2 billion in its financial year ended Dec 31, 2013.

Thus, if Kah Motor can get 30% of Mitsubishi Motors’ business, it could translate into an improvement of close to 10% to its bottom line.

This could also be a boost for parent Oriental. For its financial year ended Dec 31, 2013, Oriental registered a net profit of RM187.5 million on revenue of RM2.8 billion.

According to notes accompanying its financials, Oriental’s automotive business accounted for slightly more than half of its total revenue in FY2013, and yet the division incurred losses.  

Now, things are looking up.

For the first six months of FY2014, Oriental posted a net profit of RM121.3 million on revenue of RM1.67 billion. The automotive segment contributed close to 53% of its revenue and 22.6% of its pre-tax profit.

Apart from the automotive business, Oriental has plantation and property development ventures, among others.

While the automotive division has ventures in Vietnam and Singapore, Oriental’s hotel business is also in Thailand, Singapore, Australia, New Zealand and the UK. Its plantation segment is active in Indonesia and its plastics business has operations in China.

Hence, it is no wonder that Oriental’s net asset value per share as at end-June this year was RM7.80, higher than its last Friday’s close of RM7.50. The company has many choice assets, such as landbank in Penang, the Klang Valley, Australia and the UK.  

It could also be that Oriental and DRB-Hicom have a working partnership to sell Mitsubishi vehicles.

While DRB-Hicom is a conglomerate involved in many lucrative businesses, Oriental has a strong balance sheet and is cash-rich.

As at end-June this year, Oriental had cash and bank balances of almost RM2.8 billion, short-term debt commitments of RM596.4 million and long-term borrowings of RM2.6 million.

The shareholders’ fund of the company stood at RM5.6 billion.

Listed in March 1964, Oriental is among the more established stocks on Bursa Malaysia.

The company is 56.5%-controlled by the family of the late Tan Sri Loh Boon Siew via Boon Siew Sdn Bhd, Penang Yellow Bus Co Bhd, Bayview Hotel Sdn Bhd, Boon Siew Development Sdn Bhd, Boontong Estates Sdn Bhd and Southern Perak Plantations Sdn Bhd.

Another substantial shareholder in Oriental is Mitsubishi UFJ Financial Group, a unit of Aberdeen Asset Management PLC, which has an 11% stake.

This article first appeared in The Edge Malaysia Weekly, on October 13 - 19, 2014.