DRB-Hicom
(Dec 9, RM2.12)
Maintain outperform with target price RM3.95: DRB-Hicom has partnered with Saab AB to bid for the Ministry of Defence’s airborne early warning system.
This is a positive move in the development of its defence business which is one of the many catalysts behind our high conviction call.
The announcement is unlikely to affect DRB-Hicom’s share price which is still driven by speculation of a potential merger with Proton. With or without Proton, we maintain our
“outperform” call. We make no change to our target price which is based on 10% discount to revalued net asset value (RNAV).
At the Langkawi International Martime and Aerospace Exhibition (LIMA 2011), DRB-Hicom announced it is partnering Saab to bid for the airborne early warning and control (AEWC)
system for the Royal Malaysian Airforce. The AEWC system will enhance the government’s monitoring of its territorial and international domains.
DRB-Hicom is broadening its defence portfolio to aerospace. Since 1996, it has supplied and maintained land vehicles for the Malaysian army. The AEWC deal, if successful, will allow it to cross as a defence contractor for the air force and the navy. It is a positive step in its plans to become a local defence champion.
The announcement is not material at this stage as DRB-Hicom is essentially forming a strategic collaboration with Saab and needs to formulate the working requirements of the
AEWC system with the Ministry of Defence before it can come up with any figures for the contract bid.
However, four units of a similar system were purchased by the Singapore defence forces in 2007 for US$375 million (RM1.18 billion) each.
DRB-Hicom remains a high conviction play. This latest announcement is unlikely to be the reason behind the recent share price activity. The press continues to speculate on the
possibility of the company tying up with Volkswagen to acquire Proton Holdings Bhd.
However, VW has come out to say that it has no plans to expand its Malaysian operations beyond its partnership with DRB-Hicom. With or without Proton, the current deal with VW is a large enough catalyst for DRB-Hicom’s auto business. VW-related earnings are expected to contribute 13% of FY14 net profit. — CIMB IB, Dec 9
(Dec 9, RM2.12)
Maintain outperform with target price RM3.95: DRB-Hicom has partnered with Saab AB to bid for the Ministry of Defence’s airborne early warning system.
This is a positive move in the development of its defence business which is one of the many catalysts behind our high conviction call.
The announcement is unlikely to affect DRB-Hicom’s share price which is still driven by speculation of a potential merger with Proton. With or without Proton, we maintain our
“outperform” call. We make no change to our target price which is based on 10% discount to revalued net asset value (RNAV).
At the Langkawi International Martime and Aerospace Exhibition (LIMA 2011), DRB-Hicom announced it is partnering Saab to bid for the airborne early warning and control (AEWC)
system for the Royal Malaysian Airforce. The AEWC system will enhance the government’s monitoring of its territorial and international domains.
DRB-Hicom is broadening its defence portfolio to aerospace. Since 1996, it has supplied and maintained land vehicles for the Malaysian army. The AEWC deal, if successful, will allow it to cross as a defence contractor for the air force and the navy. It is a positive step in its plans to become a local defence champion.
The announcement is not material at this stage as DRB-Hicom is essentially forming a strategic collaboration with Saab and needs to formulate the working requirements of the
AEWC system with the Ministry of Defence before it can come up with any figures for the contract bid.
However, four units of a similar system were purchased by the Singapore defence forces in 2007 for US$375 million (RM1.18 billion) each.
DRB-Hicom remains a high conviction play. This latest announcement is unlikely to be the reason behind the recent share price activity. The press continues to speculate on the
possibility of the company tying up with Volkswagen to acquire Proton Holdings Bhd.
However, VW has come out to say that it has no plans to expand its Malaysian operations beyond its partnership with DRB-Hicom. With or without Proton, the current deal with VW is a large enough catalyst for DRB-Hicom’s auto business. VW-related earnings are expected to contribute 13% of FY14 net profit. — CIMB IB, Dec 9
