Profile: DRBHCOM develops, assembles, and sells motor vehicles and military vehicles. It also operates banking, property development and construction work as well as provides logistic, airline catering and ground handling services.

Steeply undervalued. The stock appears mispriced, trading at just 6.6x FY22E EPS (58% below its peers’ average of 15.6x) and at 0.44x P/B (65% below its peers’ P/B of 1.2x). We project core earnings to reach RM489m in FY22E and RM655m in FY23E from –RM150m in FY21, underpinned by the re-opening of automotive sector especially in its main operation region of Klang Valley effective 16 Aug, leveraging on SST exemptions and attractive model line-up from Proton, Honda and Mitsubishi. Notably, Proton has continued to forge ahead towards its 10-year restructuring target of becoming the largest automotive player in Malaysia and the 3rd in South East Asia by 2027.

Other key segments. Composite Technology Research Malaysia (CTRM) will also leverage the recovery of global aviation sector (especially in US, Europe and China markets). Property contributions will also remain sustainable, given its concession income for Northern Gateway ICQS and Media City. The group will continue to monetize its huge landbank over the longer term. Other businesses in the group will continue to adapt to the “new normal” environment to ensure financial sustainability amid current pandemic. Based on weekly chart, DRBHCOM is poised for downtrend line breakout after tumbling from a 52-week high of RM2.25 to a low of RM1.58 before closing at RM1.66 last Friday, supported by bottoming up indicators. A decisive breakout above RM1.72 (downtrend line from RM2.25) will lift prices higher towards RM1.83 (38.2% FR) before reaching our LT objective at RM1.99 (61.8% FR). The collection range is pegged at the RM1.58-1.67 range. Cut loss at RM1.55.

Source: Hong Leong Investment Bank Research - 30 Aug 2021