Anticipate a strong turnaround in FY21-22. HLIB Research maintains a BUY rating with a SOP-derived fair value of RM2.52 (a 25% discount to SOP: RM3.35), supported by undemanding 9.3x FY21 PE (13% lower than peers) and 0.60x P/B (50% lower than peers) coupled with robust turnaround for FY21-22 core earnings from an estimated loss of RM88m in FY20. We remain positive on DRB’s outlook as it continues to enjoy strong automotive sales growth, leveraging on SST exemptions, along with attractive models line-up from Proton, Honda and Mitsubishi. DRB also has strong leverage on the strong growth momentum of Proton within the next few years. Moreover, various attractive embedded assets within DRB provide significant value accretion potential.

DRBHCOM daily: Bullish ST downtrend channel breakout

Bullish ST downtrend channel breakout. After surging 124% from a 52-week low of RM0.98 (19 Mar) to a high of RM2.20, DRBHCOM fell to a low of RM1.83 (2 Nov) before ending at RM2.02 last Friday. Following the downtrend channel breakout and positive indicators, we expect the stock to recapture the RM2.10-2.20 overhead resistance levels soon. A successful breakout will send share price higher towards our LT objective at RM2.42 (YTD high). Supports are pegged at RM1.96 (mid BB) and RM1.88 (lower BB). Cut loss at RM1.86.

Source: Hong Leong Investment Bank Research - 16 Nov 2020