KUALA LUMPUR (March 5): AmResearch has reaffirmed its Buy rating on DRB-Hicom with its fair value unchanged at RM4 a share, pegging a 10% discount to its sum-of-parts value of RM4.40 a share.
The research house said on Monday it was reported in the press today that DRB-Hicom is evaluating plans by Mitsubishi, Volkswagen and General Motors (GM) to revive Proton.
It said that GM has proposed to gain control of half of Proton’s production lines at the latter’s plant in Tanjung Malim. This is not something new as it was already speculated in the market earlier that GM plans to buy a 50% stake in the plant.
“This proposal makes sense given the much-publicised under-utilised Tanjung Malim plant – running at barely 50% utilisation. A valuation of RM800 million for the plant stake has been bandied about but the key point here is that Proton would be able to achieve economies of scale,” it said.
AmResearch said it continues to like DRB-Hicom, given it is one of the cheapest conglomerates – trading at CY12 of 13 times versus its peers of 18 times.
“The group is on an exciting growth path, as it is the best proxy to VW’s ambition to be a key ASEAN auto player. DRB would also benefit in the transformation of Pos Malaysia – recently showing strong a set of results – and the next leg up would be to reap the synergies with its sister company, Bank Muamalat,” it said.
The research house said on Monday it was reported in the press today that DRB-Hicom is evaluating plans by Mitsubishi, Volkswagen and General Motors (GM) to revive Proton.
It said that GM has proposed to gain control of half of Proton’s production lines at the latter’s plant in Tanjung Malim. This is not something new as it was already speculated in the market earlier that GM plans to buy a 50% stake in the plant.
“This proposal makes sense given the much-publicised under-utilised Tanjung Malim plant – running at barely 50% utilisation. A valuation of RM800 million for the plant stake has been bandied about but the key point here is that Proton would be able to achieve economies of scale,” it said.
AmResearch said it continues to like DRB-Hicom, given it is one of the cheapest conglomerates – trading at CY12 of 13 times versus its peers of 18 times.
“The group is on an exciting growth path, as it is the best proxy to VW’s ambition to be a key ASEAN auto player. DRB would also benefit in the transformation of Pos Malaysia – recently showing strong a set of results – and the next leg up would be to reap the synergies with its sister company, Bank Muamalat,” it said.
