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

- Proton yesterday launched its B-segment 5-door hatchback Iriz, with 1.3L and 1.6L variants, pitting it squarely in direct competition with rival Perodua’s Myvi at a similar price range of RM42,000-RM64,000.

- Pre-launch, it had already received 17,000 bookings for the compact car. Mass production will start next month. It is targeting annual sales of 160,000 units for all models.

- For 5MFY15F (to Aug 2014), Proton had sales of ~50,000 units (-15% YoY), accounting for 19.8% of the passenger car (PC) market vs. Perodua’s 33% (84,000 units: +1% YoY). Total PC sales rose 4% in the same period.

- Iriz’s launch will boost sales to beyond the FY annualised volume of just 120,000 units. For now, we maintain our 5% growth assumption for Proton sales at ~145,000 units for FY15F (vs. FY14’s 137,144 units), representing sales of~12,000 units/month.

- Over 2012-2013, Proton on average sold 11,000-12,000 units/month compared with Perodua’s 16,000 units/month. For the eight months to 31 Aug 2014, Proton posted sales of ~83,000 units (-11% YoY; monthly average of ~8,000 units), accounting for ~21% of the passenger car market, vs. Perodua’s 32% (~130,000 units; -1% YoY). Total PC sales volume rose 3% in the period.

- Iriz is seen as a serious rival to the Myvi, which has for the past eight years led the sales in the domestic market, helping Perodua to garner over 30% of market share.- Based on a new platform for the local and global markets, it took Proton four years and RM560mil to develop the car. The same platform may be shared with the upcoming electric and hybrid models.

- Proton sees the PCC, with new 1.3-litre and 1.6-litre VVT (variable valve timing) engines as the game changer for the carmaker and its export programme.

- We believe Iriz’s launch is positive for Proton. Its auto division posted an estimated EBIT of RM92mil (38% of our full-year forecast of RM240mil) in 1QFY15 (+9% YoY) vs. a loss of RM44mil in the previous quarter, aided by recognition of revenue from defence jobs. We maintain our numbers and BUY call.

Source: AmeSecurities