DRB-Hicom Bhd (Nov 25, RM2)
Maintain outperform at RM2.08 with target price RM3.95: Results for 1HFY12 accounted for 51% of our full-year forecast. The auto division did surprisingly well as the Volkswagen relationship is already bearing fruit. Maintain “outperform” recommendation and target price based on 10% discount to revised net asset value.
A big surprise was the 18% year-on-year (y-o-y) rise in 1H operating profit from the auto division to RM99 million despite a higher than expected 12% fall in turnover. This was due to the high-margin business of facilitating the import of all VW completely built-up (CBU) units into Malaysia. This exposure to VW sales should escalate in 2HFY12 when the execution of the collaborative agreement with VW goes into full swing. The assembly of completely knocked down (CKD) units has started in Pekan and DRB-Hicom is expected to get a holistic share of the entire distribution business in Malaysia, which will go much further beyond the current handling of approved permits (APs) and logistics for VW. We have not factored any of this prospect into our FY12 forecast. Any event here would mitigate the anxieties over Honda Malaysia.
Net profit contribution from Honda Malaysia for 1HFY12 slumped 43% y-o-y as the unit was still getting back to full production after the Japanese earthquake and tsunami. However, the plant has been shut down due to the floods in Thailand. We expect the unit to break even for the full year.
The breakdown of 1HFY12 net profit met our expectations — 45% from the auto business, 18% from Bank Muamalat and 37% from concessions. There is no contribution from property yet. However, the unexpectedly high tax rate subdued what would have been a better than expected set of results. — CIMB Research, Nov 25
This article appeared in The Edge Financial Daily, November 29, 2011.
Maintain outperform at RM2.08 with target price RM3.95: Results for 1HFY12 accounted for 51% of our full-year forecast. The auto division did surprisingly well as the Volkswagen relationship is already bearing fruit. Maintain “outperform” recommendation and target price based on 10% discount to revised net asset value.
A big surprise was the 18% year-on-year (y-o-y) rise in 1H operating profit from the auto division to RM99 million despite a higher than expected 12% fall in turnover. This was due to the high-margin business of facilitating the import of all VW completely built-up (CBU) units into Malaysia. This exposure to VW sales should escalate in 2HFY12 when the execution of the collaborative agreement with VW goes into full swing. The assembly of completely knocked down (CKD) units has started in Pekan and DRB-Hicom is expected to get a holistic share of the entire distribution business in Malaysia, which will go much further beyond the current handling of approved permits (APs) and logistics for VW. We have not factored any of this prospect into our FY12 forecast. Any event here would mitigate the anxieties over Honda Malaysia.
Net profit contribution from Honda Malaysia for 1HFY12 slumped 43% y-o-y as the unit was still getting back to full production after the Japanese earthquake and tsunami. However, the plant has been shut down due to the floods in Thailand. We expect the unit to break even for the full year.
The breakdown of 1HFY12 net profit met our expectations — 45% from the auto business, 18% from Bank Muamalat and 37% from concessions. There is no contribution from property yet. However, the unexpectedly high tax rate subdued what would have been a better than expected set of results. — CIMB Research, Nov 25
This article appeared in The Edge Financial Daily, November 29, 2011.
