Post meeting with management, we remain positive on DRB’s outlook. Proton is expecting continued growth momentum in 2023, while Honda and Mitsubishi to sustain. FY23 earnings will continue to be driven by automotive segment. CTRM will continue to ride on the recovery of aviation sector. Muamalat’s earnings are expected to normalise again and ride on OPR hike. Property segment will improve with new project launches during the year. However, both Deftech and PosM are expected to remain subdued in the near term. We reiterate our BUY recommendation with unchanged TP: RM2.24 based on 20% discount to SOP: RM2.80.

Proton. Since the restructuring exercise in 2017, Proton has been achieving yearly sales growth, driven by increasing demand for its models especially for its new X-series SUVs. The national OEM has returned to profits in FY22. Entering 2023, Proton is targeting another year of growth to 147k units (+3.9%), with potential upsides. Currently Proton has a backlog of 60k units (15k units is still to PENJANA SST exemption scheme). Proton has guided 3 new model launches this year (including smart#1), which will include a mild hybrid variant (MHEV). Management also guided margins to remain stable in FY23. Relating to export market, management is targeting 10k units (achieved 5k units in FY22). Management remains confident of Proton’s 10 year turnaround plan to become the leading marque in Malaysia and top 3 in ASEAN region.

Other autos. Honda is targeting sales of 80k units in FY23 (similar to 80.2k units in FY22) with estimated backlog of 40k units. We expect sales to be supported by new model launches by Honda for this year. Similarly, both Mitsubishi and Isuzu also received strong demand and expected to sustain performance in 2023.

Deftech/CTRM. Deftech is expected to experience slowdown in 2022, post delivery of final units of AV8 in late 2022. We expect contribution from Deftech to slowdown in FY23 pending new major contract awards. CTRM is leveraging onto the booming aviation sector as airlines are scrambling to reinstate their fleet capacity while aircraft manufacturers are working hard to deliver the aircrafts.

Bank Muamalat. 70% owned Muamalat was affected by fair value loss on one of its investment during 4QFY22. Management expects the bank’s earnings will normalise again and ride on the OPR hike in FY23.

PosM. 53.5% owned PosM disappointed the market again with losses for the year due to sudden huge drop in courier volume. The trend is very much similar to other courier service providers (eg. GDEX and Nationwide). While major cost has been steamlined over the years, management remained cautious on PosM turnaround in the near term due the weakened market demand outlook.

Property. Losses for the year mainly dragged by the delay in the completion of Media City and delay in new project launches, affected by the pandemic. Management expects improvement in FY23 as Media City targeted to complete by mid-2023 and new project launches during the year.

Forecast. Unchanged.

Maintain BUY, TP: RM2.24. Maintain BUY with an unchanged TP: RM2.24, based on a 20% discount to SOP: RM2.80. We remain positive on DRB’s outlook on sustainable automotive segment, leveraging on Proton, Honda and Mitsubishi. DRB also has a strong leverage onto the robust growth momentum of Proton over the next few years, as the unit aspire to reclaim the throne in Malaysia and expand into regional market.

Source: Hong Leong Investment Bank Research - 3 Mar 2023