THE expected announcement of a stake sale in Proton Holdings Bhd saw investors buying parent company DRB-Hicom Bhd shares, which rose or 19 sen to RM1.82, with a total 41.5 million shares traded vesterdav.
The trading volume was 4.3 times above its 20-day average as DRB-Hicom’s share price hit a two-year high.
The stake sale in loss-making Proton to a foreign strategic partnership (FSP) is expected to lower the pressure on DRB-Hicom’s financials and improve earnings outlook.
Institute for Democracy and Economic Affairs manager of external relations Azrul Mohd Khalib said “it’s clear Proton needs an injection of fresh capital and leadership”.
“The national carmaker needs more than just money; it needs some fresh insights anc tenants to change its business direction. Proton would benefit from selling its majority stake, particularly its manufacturing facility. The decision Jr) The FSP could make Proton profitable as long as the decisions made are Intended to drive business, says Azrul. The decision needs to be considered realistically rather than from a sen-timental nationalistic point of view’ he told The Malaysian Reserve yesterday.
In April last year, the government granted Proton a soft loan of RMl.5 billion to pay its vendors for the component supplies with the condition it came up with its turnaround plan to cx”pand its domestic and international reach with a strategic partner, “Proton requires a commitment to change by taking a profit-driven look at the market. The FSP could make Proton profitable as long as the decisions made are intended to drive business. Automotive players look at Proton as the door into the Asean market as it is a huge and worthy asset/’ he said. According to industry sources, China’s Geely Automobile Holdings Ltd and French automotive manufacturer PSA Croup have been shortlisted as Proton’s bidders.
CIMB Research, in a report last week, put a target price of RM2.25 on DRB-Hicom on the belief the group’s new paint shop will lead to a higher production of Volkswagen cars. The research outfit noted its valuation takes into account a higher appreciation of DRB-Hicom’s defence contract business, which has a RM7.55 billion contract from the government to supply 257 armoured-wheeled vehicles.
For the nine months ended Dec 31, 2U16. DRB-Hicom recorded RM8.6 billion in revenue compared to RM9.5 billion in the corresponding period ended Dec 31, 2015, mainly due to a reduction in motor vehicle sales caused by a weaker domestic demand and lower sales of property projects.
The group posted a net loss of RM125.M million or, loss of 6.5 sen a share, for the nine months.
First published in The Malaysian Reserve by AYISY YUSOF, 18 may 2017