• We maintain HOLD and an SOP-based FV of RM1.89/share on DRB-Hicom.

• Honda Malaysia said on Thursday it will recall a total of 49K units of the Odyssey MPV and Accord Sedan due to issues with the battery sensors and door mirrors. The Accord is a CKD model and the Odyssey CBU.

• The first affects 20K units of Accord built between 2013 and 2016, while the second affects 28K units of Accord built from 2013-2016 and less than 1K Odyssey built from 2014-2017.

• The battery sensor issue could result in smoke emanating from the hood or a fire in the worst case scenario; and the defective door mirrors could retract mid-drive or during parking. Honda Malaysia said there has been no reported cases of fire, accidents or injuries from the two issues identified.

• We are assured that Honda has identified the issue and is swiftly taking steps to inform the customers that are affected, who will receive replacements at no cost.

• We believe this would not hamper Honda sales, which have been strong in lieu of several new launches and the weakness in its immediate peers (Toyota, Nissan).

• Honda saw sales improve 18% YoY in the 11M17 period and is the clear market leader with a 36% share of the non-national side. While DRB-Hicom benefits from its associate stake of 34% in Honda Malaysia, our key concerns from loss-making Proton remain. Proton sales only grew 2% YoY in the 11M17 period after seeing sales drop by a third in 2016.

• We maintain HOLD and an SOP-based FV of RM1.89/share on DRB-Hicom.

Source: AmInvest Research - 22 Dec 2017