KUALA LUMPUR (April 3): News on the return of China's Geely Auto Holdings Ltd in the race to bid as the foreign strategic partner (FSP) for Proton Holdings Bhd is seen as positive for major stakeholder DRB-Hicom Bhd, said CIMB Research.

Referring to the article Geely back in play published in The Edge Malaysia Business & Investment Weekly (The Edge Weekly) April 3–9, the research house said in a note today DRB-Hicom would benefit from more bidders, which will bring out the "maximum value for its stake in Proton".

"The Edge Weekly reported that the Chinese automaker, Geely, is back in the running to become Proton's FSP. This contradicted the statement by Geely's president An Conghui two weeks ago, that Geely had withdrawn its bid to acquire an equity stake in Proton," it said.

The news is not surprising, said the research house, as DRB-Hicom did announce that all bids are still being evaluated. The company is on track to announce its decision before June this year, it added.

Companies that have bid to become Proton's FSP include Geely and French auto company PSA Group, whereas interested bidders include Renault SA, Volkswagen AG and Suzuki Motor Corp, added the note.

Finding the right FSP will help support Proton's turnaround plan, and to mitigate the immediate impact of losses to DRB-Hicom, said CIMB Research.

"The Edge Weekly reported that Proton is seeking additional funds of RM1.5 billion to 1.8 billion to satisfy outstanding payments to its vendors," it said.

Proton's search for an FSP is one of the terms for the RM1.5 billion soft loan it received from the government last year.

The research house maintained an "add" call with an unchanged target price of RM1.69 for DRB-Hicom. "Our call is supported by the imminent FSP for Proton and better performance in its services division," it said.

At 11.06am, shares of DRB-Hicom were traded 2 sen lower at RM1.38, with 1.88 million shares traded.