- We reiterate our BUY call on DRB-Hicom Bhd, with an unchanged fair value of RM3.60/share – a 15% discount to our SOP value of RM4.25/share.

- DRB-Hicom’s FY14 result was within expectations, with a core net profit of RM280mil (+218% YoY) – just 3.5% above consensus forecast, but well ahead of our estimate of RM223mil.

- It declared a single-tier final dividend of 4.5 sen/share, bringing the total to 6 sen/share (FY13: 6 sen/share gross less tax) for the year – meeting our forecast.

- The exceptional items in FY14 included a gain of RM111.7mil on the bargain purchase of Composites Technology Research Malaysia Sdn Bhd (CTRM) and a gain of RM83mil from the disposal of Uni.Asia Life Assurance Bhd.

- Notably, the automotive division remained in the red in 4QFY14, albeit at a lower amount vs. the previous quarter, with an estimated EBIT of -RM44mil vs. -RM131.4mil in 3QFY14.

- Proton car sales for FY14 fell 2.3% to 137,144 units. In 4QFY14, the sales volume at 32,734 units was up by 6.6% QoQ, but down 4.7% YoY.

- For the full year, the division managed to stay in the black with an EBIT of RM90mil, with contributions from the AV8 project and the inclusion of aerospace composite business.

- The outperformer was the property, asset & construction (PAC) segment, which posted a nearly six-fold increase in its operating profit to an estimated RM204.6mil for FY14 from RM35mil in FY13.

- However, note that the outperformance was mainly due to the gain from the disposal of certain parcels of land in Johor.

- DRB-Hicom group had sold parcels of freehold land measuring ~613.79 acres to Promosi Etika Sdn Bhd for RM534.73mil cash. The SPAs became unconditional on 26 March 2014.

- The services sector underperformed with an est. EBIT of RM427mil (-10% YoY). We had anticipated a 13% rise in the segment’s operating profit.

- We maintain our FY15F-FY16F numbers for now. Its automotive division should show better performances in the quarters ahead as the AV8 project goes into the commercial production phase later during the year.

Source: AmeSecurities