DRBHCOM (1619) - DRB-Hicom - ASEAN foray, finally?
Target RM2.30 (Stock Rating: HOLD)
Proton’s MoU and potential collaboration with PT. Adiperkasa Citra Lestari to develop Indonesia’s national car is positive for its long term survival, as it badly needs to start penetrating regional markets meaningfully to boost its sales volume. However, it may still take another few years for the project to eventually materialise. We make no change to our EPS forecasts and NTA-based target price, and we maintain our Hold recommendation, due to the lingering concern about Proton’s continued losses. Switch to Berjaya Auto.
What Happened
Proton has signed a memorandum of understanding (MoU) with PT. Adiperkasa Citra Lestari (PT ACL) today to establish cooperative ties between Malaysia and Indonesia in relation to the development and manufacturing of Indonesia’s National Car. The MoU is aimed at furthering business opportunities between both companies of the two neighbouring countries in areas relating to the development and manufacturing of the proposed vehicle project. Under the MoU, a feasibility study will be conducted to explore specific areas of cooperation between the two companies, including the potential development and manufacturing of the project in the Republic of Indonesia. With the potential collaboration, both companies will come up with a feasibility study in the overall areas of automotive operations and businesses, including the commercial and technical aspects of the project. Subject to the completion of a successful feasibility study, Proton and PT ACL will sign a definitive joint venture agreement for the proposed project.
What We Think
The MoU and potential future collaboration is positive for Proton. We believe Proton badly needs to gain substantial exposure to the regional markets for its long-term survival, and this collaboration presents Proton with an opportunity to penetrate the most populated nation in the region. Currently, Proton’s sales are mostly dependent on the Malaysian market, which has become increasingly saturated and offers little potential for future growth. However, as the MoU is only an expression of the current intention and not binding on both parties, we believe it will take a few years for the project to eventually take off and for the first production to commence.
What You Should Do
Stay on the side lines. Although we believe its Iriz model is a step in the right direction, Proton is still bleeding, and we expect it will take another few years for it to return to the black. Switch to Berjaya Auto for our top pick.
Source: CIMB Daybreak - 09 February 2015
Target RM2.30 (Stock Rating: HOLD)
Proton’s MoU and potential collaboration with PT. Adiperkasa Citra Lestari to develop Indonesia’s national car is positive for its long term survival, as it badly needs to start penetrating regional markets meaningfully to boost its sales volume. However, it may still take another few years for the project to eventually materialise. We make no change to our EPS forecasts and NTA-based target price, and we maintain our Hold recommendation, due to the lingering concern about Proton’s continued losses. Switch to Berjaya Auto.
What Happened
Proton has signed a memorandum of understanding (MoU) with PT. Adiperkasa Citra Lestari (PT ACL) today to establish cooperative ties between Malaysia and Indonesia in relation to the development and manufacturing of Indonesia’s National Car. The MoU is aimed at furthering business opportunities between both companies of the two neighbouring countries in areas relating to the development and manufacturing of the proposed vehicle project. Under the MoU, a feasibility study will be conducted to explore specific areas of cooperation between the two companies, including the potential development and manufacturing of the project in the Republic of Indonesia. With the potential collaboration, both companies will come up with a feasibility study in the overall areas of automotive operations and businesses, including the commercial and technical aspects of the project. Subject to the completion of a successful feasibility study, Proton and PT ACL will sign a definitive joint venture agreement for the proposed project.
What We Think
The MoU and potential future collaboration is positive for Proton. We believe Proton badly needs to gain substantial exposure to the regional markets for its long-term survival, and this collaboration presents Proton with an opportunity to penetrate the most populated nation in the region. Currently, Proton’s sales are mostly dependent on the Malaysian market, which has become increasingly saturated and offers little potential for future growth. However, as the MoU is only an expression of the current intention and not binding on both parties, we believe it will take a few years for the project to eventually take off and for the first production to commence.
What You Should Do
Stay on the side lines. Although we believe its Iriz model is a step in the right direction, Proton is still bleeding, and we expect it will take another few years for it to return to the black. Switch to Berjaya Auto for our top pick.
Source: CIMB Daybreak - 09 February 2015
