- We maintain BUY on DRB-Hicom with an unchanged fair value of RM3.60/share – a 15% discount to our SOP value of RM4.25/share.
- DRB-Hicom posted a 2QFY15 core net profit of RM41mil (-69% QoQ, -77% YoY), bringing the 1HFY15 total to RM174mil (-12.8% YoY) – accounting for 44% and 47% of our and consensus estimates, respectively.
- While broadly in line with consensus numbers, the effective tax rate is at 29% vs. our projected rate of 24%. At the latter rate, earnings would have made up 48% of our full-year forecast.
- Operating performance came in below expectations, with EBIT accounting for only 35% of our estimate. The bottom line was boosted by a significant improvement in its associates, in particular at Honda Malaysia.
- Honda Malaysia’s sales volume jumped 67% to 41,120 units in 1HFY15 from 24,569 units in 1HFY14. Strong contributions came from the City, Accord, and Jazz models.
- In sharp contrast, DRB-Hicom’s subsidiary Proton registered a 21% decline in sales to 58,051 units from 73,699 units a year earlier.
- The sales volume of its other marques in 1HFY15 were down, with Audi falling 45% to 890 units, Isuzu down 7% to 5,415 units and Suzuki declining 22% to 1,869 units. Mitsubishi sales rose 26% YoY to 7,390 units,
- DRB-Hicom said the automotive segment’s 2% rise in revenue was contributed by recognition of defence projects (including the RM7.5bil AV8 contract) and the inclusion of sales from Composites Technology Research Malaysia Sdn Bhd.
- In all, its vehicle sales totalled 171,132 units in the January-September 2014 period, accounting for ~35% of the total industry volume during the same period.
- In the services segment, the impact from the disposal of the insurances business was cushioned by improved performances of the concession businesses.
- DRB-Hicom cautioned that the remainder of the financial year is expected to be “very challenging” and it would focus on improving operational effectiveness and cost efficiencies.
- We maintain our numbers for now.
Source: AmeSecurities
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