• DRB-Hicom announced the following on Friday:
  1. Geely Holding will nominate the new chief executive officer for the production arm of Proton (Perusahaan Otomobil Sdn Bhd or PONSB) to replace Datuk Ahmad Fuaad Kenali, who will be stepping down at the end of the month. Ahmad Fuaad has served as the CEO since April of last year. Proton Holdings Bhd comprises its production arm (PONSB) and distribution arm (Proton Edar Sdn Bhd), which are both wholly-owned subsidiaries.
  2. For continuity, three key individuals will remain in their roles: Datuk Radzaif Mohamed (deputy CEO of PONSB), Abdul Rashid Musa (CEO of Proton Edar Sdn Bhd) and Datuk Seri Syed Faisal Albar (chairman of Proton Holdings, and who is also the group MD for DRB-Hicom).
  3. The transaction for Geely to acquire 49.9% of Proton will be completed soon. The boards for the three components of Proton (its holding company, the production arm and distribution arm) will be announced subsequently, and DRB-Hicom will hold one additional seat (to Geely) to reflect its majority stake.

• We make no changes to our earnings projections. We view positively the group's intention to make changes to its top leadership. This would be the first major reform towards making Proton profitable.

• The immediate goal will be to develop the long-term roadmap for Proton. The company has seen consecutive losses for at least six years; it registered a revenue of RM4.2bil and net loss of RM934.1mil in its FY17 ended March 2017.The main goals are to raise the production volume (by boosting domestic sales and begin exports to right-hand markets in SEA), and invest in narrowing the technology gap with rivals.

• We maintain a HOLD on DRB-Hicom with an SOP-based fair value of RM1.89/share.

Source: AmInvest Research - 18 Sept 2017