DRB-Hicom (DRB) announced that it has entered into a Joint Venture Agreement (JVA) with Zhejiang Geely Holdings Group Co Ltd (Geely) with regard to development of the Automotive HiTech Valley (AHTV) project. This follows the recent Master Collaboration Agreement signed in October 2023. We are positive on this development as the JVA establishes a platform for cooperation to leverage on the respective strengths and expertise of parties involved in establishing AHTV as an international automotive hub for next generation vehicles. Pending further details on this JVA, we keep our estimates unchanged. We continue to favour DRB’s growth prospect and retain our Outperform call with unchanged sum-of-parts (SOP) based TP of RM2.10.

• Geely is a global mobility technology group headquartered in the city of Hangzhou, China. It owns and manages a number of brands including Geely Auto, Lynk & Co, ZEEKR, Geometry, Volvo Cars, Polestar, Lotus, London Electric Vehicle Company, and other brands. Geely is DRB’s strategic partner, holding a 49.9% stake in Proton.

• AHTV is aimed at being the next generation international vehicle hub in Tanjung Malim covering extensive automotive and mobility solutions across the value chain, from technology research & development centre, to manufacturing cluster as well as supporting services and associated ecosystem including logistics, research university, training and learning institutions within a smart city. The AHTV is expected to attract some RM32bn worth of investments over the next 10 years and expand the capability of local vendors towards specializing in high technology manufacturing.

• The JVA outlines key principles of the strategic collaboration, objectives and terms of the partnership, including (i) form and capital structure of the JV company, (ii) the parties to jointly prepare initial business plan and feasibility study, with (iii) initial funding of up to RM10m for all related costs and expenses.

Source: PublicInvest Research - 12 Dec 2023