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AmInvest Research Reports

Author: AmInvest   |   Latest post: Fri, 20 Sep 2019, 9:04 AM

 

DRB-Hicom - Faces lawsuit claim

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  • DRB-Hicom (DRB) said on Thursday it faces a RM522.9mil claim from Goldstar Heavy Industrial Co Ltd.
  • Goldstar is claiming the amount from Perusahaan Otomobil Nasional Sdn Bhd, a unit of Proton, over a joint venture dated April 2015 comprising Proton, Lotus Group International and Goldstar to make and sell Lotus products (cars and parts) in China. The equity ownership in the JV were 40%, 10% and 50% respectively.
  • The JV, called Goldstar Lotus Automobile, had been terminated in January 2018. The JV failed to acquire a manufacturing licence by the deadline of end-2017 and this entitled any party within the JV to terminate the arrangement, DRB said.
  • DRB said the appearance date for the claim was 9 July 2019 and that its legal advisors were reviewing the claim. DRB did not elaborate on the rationale of the claim by Goldstar or the exorbitant amount of the claim.
  • It insisted that Geely would not be part of the lawsuit as the sale of a stake in Proton to Geely came later.
  • We do not factor in any impact for now from this lawsuit as the deeper justification for its existence and amount were not made clear. We caution that DRB is not in the place to be serving such a gargantuan amount as the recovery plan for Proton is just commencing.
  • Early reception to the X70 seems encouraging (15K in bookings and 2K in deliveries so far) and this sets the base for a bigger market required for the localization of the car eyed for the second half of this year. We maintain a HOLD call and an FV of RM1.99/share on DRB.

Source: AmInvest Research - 18 Jan 2019

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