DRBHCOM (1619) - DRB-Hicom - A slow turnaround
Target RM2.30 (Stock Rating: HOLD)
With most of its businesses steady and some of them chalking up commendable growth, returning Proton to sustainable profitability remains the biggest task for DRB’s management due to the former’s size and impact on the group’s bottom line. We make no changes to our EPS forecasts and NTA-based target price and maintain our Hold call. Although both Proton and Lotus are still in the red, there have been positive signs, and we believe the turnaround is heading in the right direction. Switch to Berjaya Auto, our sector top pick.
We make no changes to our EPS forecasts and NTA-based target price and maintain our Hold call. Although both Proton and Lotus are still in the red, there have been positive signs, and we believe the turnaround is heading in the right direction. Switch to Berjaya Auto, our sector top pick.
Proton the biggest task
We met with DRB-Hicom’s management last week. At the meeting, we were informed that Proton’s Iriz sales picked up in March, with more than 4,000 units sold. Management is targeting 5,000 units of sales per month for Iriz and 12,000 per month overall for Proton from April onwards. Lotus has also seen encouraging growth, with more than 2,000 units sold globally in FY15 vs. around 1,200 units in FY14. With the majority of its businesses stable and some offering commendable growth, turning around Proton remains the primary challenge for the group and is a major concern for investors. Although the signs are positive, both Proton and Lotus are still incurring losses. The management has set sales targets that will lead to both entities breaking even in FY16 or latest by FY17 and has reiterated that its targets are achievable. Although this is not an easy task, we remain cautiously optimistic on the group achieving the targets given the positive momentum.
Defence & aviation growing
Another segment under the group’s auto division, DRB’s defence and aviation businesses are performing well, with Deftech on schedule to deliver the AV8 units to the Ministry of Defence while its new acquisition CTRM was recently awarded a new contract that takes its order book to around RM11bn and could last up to ten years.
Stable services
DRB’s services division is steadily growing, with strong expansion in a few units, namely Alam Flora and KLAS. Alam Flora has benefitted from the hike in concession rate for the majority of the areas it services while KLAS has benefitted from the consolidation of its newly-acquired KLB, which it has managed to return to profitability. KLB’s addition bodes well for the group’s aspirations to become a fully-integrated logistics services provider.
Source: CIMB Daybreak - 13 April 2015
Target RM2.30 (Stock Rating: HOLD)
With most of its businesses steady and some of them chalking up commendable growth, returning Proton to sustainable profitability remains the biggest task for DRB’s management due to the former’s size and impact on the group’s bottom line. We make no changes to our EPS forecasts and NTA-based target price and maintain our Hold call. Although both Proton and Lotus are still in the red, there have been positive signs, and we believe the turnaround is heading in the right direction. Switch to Berjaya Auto, our sector top pick.
We make no changes to our EPS forecasts and NTA-based target price and maintain our Hold call. Although both Proton and Lotus are still in the red, there have been positive signs, and we believe the turnaround is heading in the right direction. Switch to Berjaya Auto, our sector top pick.
Proton the biggest task
We met with DRB-Hicom’s management last week. At the meeting, we were informed that Proton’s Iriz sales picked up in March, with more than 4,000 units sold. Management is targeting 5,000 units of sales per month for Iriz and 12,000 per month overall for Proton from April onwards. Lotus has also seen encouraging growth, with more than 2,000 units sold globally in FY15 vs. around 1,200 units in FY14. With the majority of its businesses stable and some offering commendable growth, turning around Proton remains the primary challenge for the group and is a major concern for investors. Although the signs are positive, both Proton and Lotus are still incurring losses. The management has set sales targets that will lead to both entities breaking even in FY16 or latest by FY17 and has reiterated that its targets are achievable. Although this is not an easy task, we remain cautiously optimistic on the group achieving the targets given the positive momentum.
Defence & aviation growing
Another segment under the group’s auto division, DRB’s defence and aviation businesses are performing well, with Deftech on schedule to deliver the AV8 units to the Ministry of Defence while its new acquisition CTRM was recently awarded a new contract that takes its order book to around RM11bn and could last up to ten years.
Stable services
DRB’s services division is steadily growing, with strong expansion in a few units, namely Alam Flora and KLAS. Alam Flora has benefitted from the hike in concession rate for the majority of the areas it services while KLAS has benefitted from the consolidation of its newly-acquired KLB, which it has managed to return to profitability. KLB’s addition bodes well for the group’s aspirations to become a fully-integrated logistics services provider.
Source: CIMB Daybreak - 13 April 2015
