Period

4Q15/FY15

Actual vs. Expectations

FY15 core PATAMI of RM202m (-20.6% YoY) excluding gains from the disposal of Uni Asia General Insurance of RM97.5m beat our forecast by 17% but came in 26% below consensus expectations. The positive variance from our forecast is mainly due to higher-than-expected contribution from associates (34%-owned Honda) and positive tax write back in 4Q15.

Dividends

A single-tier final dividend of 4.5 sen was declared in this quarter. This brings FY15 DPS to 6.0 sen which is inline with our expectation. Key Result

Highlights

QoQ, 4Q15 revenue decline 9% to RM3.2b due to lower contribution across the board from automotive, services and property divisions. Pretax profit in 4Q15 fell 54% to RM44.6m, largely drive by 34%-owned Honda. However, due to a tax writeback amounting to RM59.3m, 4Q15 PATAMI came in at RM88.9m (vs RM9m in 3Q15).

YTD, FY15 core net profit came in at RM202m (- 20.6% YoY) due to contribution from 34%-owned Honda, including Composites Technology Research SB (CTRM), higher progress billings of AV8 project and better performances in the property segment. Proton continued to disappoint with negative sales growth of 19% bringing total sale units to 110k in 12M15. Solid Honda sales (+52% y-o-y) boosted associate contributions by >100% y-o-y.

Outlook

Earnings contributions are expected to come gradually from the RM7.55b AV8X8 contract while the property division is expected to contribute positively from the launching of property projects. However, Proton is seen to continue losing market share with the automotive division dragging down earnings.

Change to Forecasts

Despite better-than-expected earnings largely due to tax writeback and contribution from 34%- owned Honda coupled with its volatile quarterly earnings, we are leaving our FY16 forecast unchanged.

Rating & Valuation

Due to the erratic quarterly earnings uncertainty, we attached a 15% discount to DRB’s SoP. Correspondingly, we downgrade our SoP derived target price from RM2.15 to RM1.81. Maintain Market Perform.

Risks to Our Call

Upside risk: Better-than-expected performance in the automotive division.

Source: Kenanga Research - 29 May 2015