DRB-Hicom (DRB) announced that it has entered into a Memorandum of Understanding (MoU) with Zhejiang Geely Holdings Group Co Ltd (Geely) to jointly develop the Automotive HiTech Valley (AHTV) and collaborate to identify vendors and investors for the hub. We are positive over this development as the involvement of Geely, known for its strength in technology and mobility eco system, is a boost for the AHTV. This can be an impetus for automobile and component manufacturers from China and other parts of the world to invest in production facilities in AHTV. Pending further development from this MoU, we keep our estimates unchanged. We remain positive on DRB’s growth prospects and retain our Outperform call with an unchanged TP of RM1.95.

• Geely is a global mobility technology group headquartered in the city of Hangzhou. It owns and manages a number of brands including Geely Auto, Lynk & Co, ZEEKR, Geometry, Volvo Cars and Polestar. It has been developing cutting-edge technologies in new energy, shared mobility, vehicle networks, autonomous driving, on-board chips, low-orbit satellites, and laser communication to embrace the upcoming multi-dimensional mobility ecology. Geely is DRB’s strategic partner, and holds a 49.9% stake in Proton.

• AHTV is envisioned to be an automotive industry center for the ASEAN region. It aims to be the Next Generation Vehicle Hub in Tanjong Malim covering extensive automotive and mobility solutions value chain from a technology research and development (R&D) centre, to manufacturing cluster as well as supporting services and associated ecosystem including logistics, research university, training and learning institutions within a smart city. Estimated value of total investments for AHTV is at RM32bn from various parties, including vendors and potential investors for the next 10-12 years. At the same time, DRB has also entered into a MoU with the Perak state government to jointly identify suitable additional land in the area to be earmarked for AHTV.

• Salient terms of the MoU. DRB and Geely will work together to attract vendors and investors into the AHTV, develop an R&D centre, explore the establishment of a Research Institute/University in AHTV and develop AHTV as a Smart City to jointly advance AHTV towards the scope of “Two Countries, Twin Park” under the Malaysia-China joint development framework mechanism.

Source: PublicInvest Research - 14 Apr 2022