Investment Highlights

• We maintain our BUY recommendation for DRB-Hicom with an unchanged SOP-based fair value of RM2.49/share (Exhibit 1).

• DRB-Hicom is acquiring nine parcels of freehold land and one parcel of leasehold land measuring 287.7 acres in Alor Gajah, Melaka for RM240mil cash from Tradewinds Plantation Bhd. The group intends to build new industrial parks in 2022 on the land, subject to future property market conditions.

• The parcels are located about 6km from the group’s existing HICOM Pegoh Industrial Park in Melaka. DRB-Hicom said the medium to long-term prospects of the land are favourable, given their strategic location and the various continuous initiatives undertaken by the Melaka state government to attract various investment projects into the state.

• At about RM0.83mil per acre, the price appears to be reasonable compared with the two recent transactions by Apex Healthcare and Malakoff, where the groups have acquired 18.8 acres and 176.5 acres for RM20.4mil and RM150.0mil, translating to RM1.08mil and RM0.85mil per acre respectively.

• The acquisition will increase DRB’s net gearing of 0.73x as at 30 Jun 2020 to 0.76x. We are neutral on this latest development as there will not be any earnings enhancements to the group for FY20–21F. We leave our forecasts and estimates unchanged.

• We continue to like DRB-Hicom as we strongly believe that Proton’s PIES models, and the recent introduction of the X70 and X50 CKDs are expected to sustain Proton’s compelling sales volume. Its SUVs remain appealing as they are competitively priced with advanced features for superior consumer experience and affordability

Source: AmInvest Research - 2 Nov 2020