We note the following updates on Proton from Friday:

1) DRB-Hicom said it has completed the sale of 49.9% in Proton to Geely Holding and the complete divestment of Lotus Advance Technologies (to Geely and Etika Automotive). The transfer of preference shares in Lotus to its new owners is still incomplete pending further discussions, although the value of the deal will remain unchanged.

2) Geely has named Li Chunrong as the chief executive of Proton's production arm Perusahaan Otomobil Sdn Bhd (PONSB) from October, replacing Datuk Ahmad Fuaad Kenali who steps down this month. Li joined Dongfeng Automobile in 1987 and served the company for 30 years. Dongfeng Automobile is a unit under Dongfeng Motor Group, which is a JV between state-owned Dongfeng Motor Corp and Nissan. He most recently served as a deputy general manager for Dongfeng Honda Engine Co Ltd, a JV between Dongfeng Motor Corp and Honda Motor that makes engine parts in China for export to Japan and Thailand.

3) Board members in the three units that make up Proton are as follows:

Proton Holdings Bhd (PHB): Datuk Seri Syed Faisal Albar as chairman. DRB-Hicom's other nominees are Amalanathan Thomas and Shaharul Farez Hassan who are part of the senior management team in DRB-Hicom. Geely nominees are Daniel Donghui Li (executive vice president and CFO of Geely) and Feng Qing Feng (group vice president and CTO of Hong Kong-listed Geely Auto).

PONSB (Proton's production arm) will have the same five nominees, with the addition of Dr Nathan Yu Ning (vice president of international business in Geely) and Winfriend Vahland (formerly the chairman and CEO of Skoda Auto).

Proton Edar Sdn Bhd (Proton's distribution arm) will have the same nominees as PONSB, with the exception of Winfriend Vahland.

As indicated earlier this month, DRB-Hicom holds one additional seat (to Geely) in the three boards to reflect its majority stake.

4) Li will oversee Proton's goal towards becoming the market leader in Malaysia and among the top three in Southeast Asia, within coming years. This begins with the introduction of the Boyue SUV by early-2019. These goals were iterated in May when the agreement between Geely and DRB was signed.

• We reduce our FY18 net loss projection for DRB-Hicom by 22% as the group is able to share Proton losses from its 3Q (Oct-Dec 2017) from the earlier assumption of 4Q (Jan-March 2018). We view positively the group's ability to close the deal and finalize the names to lead Proton. Furthermore, the inclusion of automotive professionals with global experience is encouraging.

• 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 - 29 Sept 2017