Analysts upbeat on DRB-Hicom’s FY19 results

KUALA LUMPUR: Analysts expect further improvement in DRB-Hicom Bhd’s financial year ended March 31, 2019 driven by the sales of its newly-launched Proton X70 and higher percentage of AV8 project.

Public Investment Bank said it maintained an ‘outperform’ call on DRB-Hicom with unchanged target price of RM2.10.

“We consider the nine-month FY19 results to be in line with our full year estimate, which is expected to improve overall performance of its automotive division,” it said.

DRB-Hicom has swung into the black with a net profit of RM73.02 million in its third-quarter ended December 31, 2018 reversing a net loss of RM70.03 million, previously.

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In an exchange filing recently, the conglomerate said the higher earnings was mainly contributed by better performance of its automotive division, including the sale of the Proton X70 and increased completion volume of the AV8 military vehicles.

DRB-Hicom’s Q3 18 revenue jumped 9.31 per cent to RM3.17 billion from RM2.90 billion on the back of higher contribution from automotive sales, banking and waste management businesses, reports NST.

Hong Leong Investment Bank (HLIB) said Proton’s turnaround remains as the key catalyst for DRB-Hicom’s earnings growth, backed by the successful launch of the new X70 sport utility vehicle (SUV) model.

“It was a good starting point, which would lead to Proton’s turnaround. Proton is expected to introduce another two Geely based models namely SX11 (a smaller SUV model known as Geely Bin Yue) and Geely VF11 a multi-purpose vehicle (MPV) within the next two years to push for stronger sales volume.

The research house said Proton has also introduced the facelifted Iriz and Persona to keep the market excited.

“With Geely as Proton’s shareholder and foreign strategic partner, we are confident on Geely’s commitment for Proton’s turnaround.

“Proton will eventually leverage on Geely to expand into China market and regional Asean market,” it added.

HLIB said it has lowered its target price of RM2.58 on DRB-Hicom, while maintaining its ‘buy’ recommendation on the company due to Geely’s commitment in turning around Proton.

Kenanga Research said Proton was in the midst of finalising a 10-year business road map targeting 30 per cent share of the domestic market and 10 per cent of regional market.

It said Proton’s target can be achieved via the introduction of new models, specifically for products portfolio in the A, B, SUV and MPV segments for their export market.

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“A new manufacturing plant in Tanjung Malim will be fully ready in five years’ time, but the first Proton car made with Geely’s technology will be rolled out by second-half of 2019.

“Geely will facilitate Proton in terms of technology and at the same time assemble its fourwheel drive model, artificial intelligent car and develop their right-hand drive technology in Malaysia.”

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