- Proton will roll out three new variants of its existing Perdana, Persona and Saga models by early next year, according to media reports. Proton chairman Tun Dr Mahathir Mohamad said the models would be new ones, and some of the components would stem from its collaboration with Honda.

- Mahathir also said Proton will design compact cars using Suzuki's drive train and is exploring suitable models using Suzuki technology. DRB-Hicom recently roped in Japan’s Suzuki Motor Corp as Proton’s foreign strategic partner.

- While domestic sales remain lacklustre, Proton’s UK-based Lotus group is potentially turning, with vehicle sales rising 55% to 2,015 units in FY15 (FY14: 1,296 units). Lotus group’s losses were more than halved to £71.1mil in FY14 from -£168mil in FY13.

- In the meantime, DRB-Hicom yesterday announced it has entered into a JV with MRCB to carry out sub-contracting works for the proposed integrated custom, quarantine and security complex (ICQS) at Bukit Kayu Hitam, Kedah. The JV is formed between their respective subsidiaries – Hicom Builders Sdn Bhd and MRCB Engineering Sdn Bhd on a 49% and 51% basis, respectively.

- First announced last February, DRB-Hicom is in the midst of acquiring Northern Gateway Infrastructure Sdn Bhd (NGISB), which holds the concession for the ICQS project, for RM20mil cash. The acquisition is expected to be completed by 3Q15.

- NGISB holds a 28-year concession, from 14 June 2014 to 13 June 2042, to design, develop, manage and lease the facilities at the ICQS Complex. The total construction cost is RM385mil. NGISB had in February 2012 awarded the construction contract to a JV between Zelan Construction Sdn Bhd and Kiara Teratai Sdn Bhd. DRB-Hicom’s JV with MRCB will now undertake the sub-contracting works.

- Construction accounts for a small part of group revenue, with most involving internal property development projects. For FY15, construction revenue was at only RM14.8mil, which represented 5% of the property, asset and construction (PAC) division’s sales of RM298.2mil. The PAC division accounted for ~17% of group EBIT for FY15.

- DRB-Hicom’s near and medium term prospects currently hinge on its RM7.55bil armoured-wheeled vehicle defence contract. We reiterate BUY, with an unchanged fair value of RM2.88/share based on a 20% discount to our SOP value of RM3.59/share.

Source: AmeSecurities Research -9 Jul 2015