Journey to Wealth

DRB-Hicom - Weak auto earnings BUY

kiasutrader
Publish date: Fri, 30 Nov 2012, 11:41 AM
kiasutrader
0 27,740
Following Message

- DRB's 2QFY13 net profit came in at RM81mil, bringing its 1HFY13 earnings to RM113mil which was way short of expectations, covering just 24% and 25% of our and consensus full-year estimates. The underperformance was due to the weak auto numbers and higher- than-expected borrowing costs. 

- Despite revenue growing more than 3 times, auto's operating profit declined by 17%. Apart from the high borrowing costs incurred for the takeover of Proton, the weak numbers may also be due to more extended losses from Lotus. 

- That aside, the property and construction (PAC) division is now back in the black at RM11mil due to strong progress billings ' we believe, mostly due to its Glenmarie developments. Similarly, strong sequential earnings growth was due to strong numbers (+64% QoQ in EBIT) from its services division ' aided by decent growth from both concession and insurance businesses.

- Going forward, we are excited about the tie-up with Honda, of which more details on DRB's plans would be revealed next week. To recap, the focus of this tie-up would be to develop a 2.0 litre-car via platform sharing, which we believe is for the long-awaited Perdana replacement model and which could also involve engine development. 

- Although Honda has a strong footing in this segment via the Accord model, cannibalisation is not an issue due to distinct pricing. We understand that DRB targets finalisation of this tie-up within six months.

- There is further upside as we believe there will be a similar arrangement with its other partners to produce models in different segments. We are not ruling out a tie-up with VW Group to produce B segment cars. Apart from the technology, DRB would be able to leverage on VW's strong global distribution network to market Proton cars overseas. Plus, this would address the under-utilisation of its Tanjung Malim plant.

- We reaffirm our BUY rating on DRB Hicom, but place our fair value and estimates under review pending an analyst briefing to be held next Monday.   

Source: AmeSecurities
DRBHCOM (1619)
Related Stocks
More articles on Journey to Wealth
Ekovest: No plan to launch another offer for Iskandar Waterfront City

Created by kiasutrader | Mar 29, 2018

Ekovest fails to get shareholders nod for IWCity takeover

Created by kiasutrader | Mar 29, 2018

King Wan (S$0.280) Wins $28.4m deals

Created by kiasutrader | May 17, 2013

Insurance - Key Points In BNM, IMF Reports

Created by kiasutrader | Mar 25, 2013

SapuraKencana Petroleum - Positive Outlook

Created by kiasutrader | Mar 25, 2013

Kenanga Research - On our Portfolio - Parliament dissolution around the corner?

Created by kiasutrader | Mar 25, 2013

SapuraKencana Petroleum - 4Q13 Analyst Briefing Key Updates

Created by kiasutrader | Mar 25, 2013

Plantation - Dorab Mistry turned less bearish on CPO Prices

Created by kiasutrader | Mar 25, 2013

Plantation Sector - Proposed accounting standard scrapped OVERWEIGHT

Created by kiasutrader | Mar 25, 2013

Pavilion Reit - Limited upside, earnings upside have been priced in HOLD

Created by kiasutrader | Mar 25, 2013

Discussions
Be the first to like this. Showing 0 of 0 comments
Post a Comment