Automotive company DRB-Hicom has been in the spotlight with the various updates and new developments surrounding it and its 50.1%-owned subsidiary Proton. The shares have been on a bullish run recently, resulting in investors focusing their attention on structured warrants over this counter. Call warrants DRBHCOM-C74 and DRBHCOM-C68 were popular with investors yesterday.

DRB-Hicom Shares and Warrants

DRB-Hicom shares have been on an upward trend these past few months. The shares didn’t perform well in January, with a 4.7% month-on-month decline to RM1.62 (31 Jan). However, they have since rebounded to go on a bullish trend for the past three months, closing at RM2.25 yesterday (24 Apr), up 32.4% year-to-date and 18.4% in month-to-date April. This week, the share price fell 0.5% on Monday (22 Apr), closed unchanged on Tuesday (23 Apr) and thereafter rose a strong 4.7% to RM2.25 yesterday (24 Apr).

The recent activity in DRB-Hicom shares has also increased investors’ interest in the structured warrants over this underlying. Yesterday, bullish investors were seen taking home 1.5mil. units of DRBHCOM-C74, which has an out-of-the-money (OTM) exercise price of RM2.35, out of the 10.8mil. units traded. They also net bought 3.1mil. units of DRBHCOM-C68, which has an in-the-money (ITM) exercise price of RM1.90, out of the 5.4mil. units traded. These two warrants were the top traded DRB-Hicom warrants by volume yesterday.

DRB-Hicom in the News

The uptrend in DRB-Hicom’s share price was supported by various news and development in the company, particularly on its 50.1%-owned subsidiary Proton Holdings (Proton).

To start, DRB-Hicom returned to the black in the third quarter ended 31 December 2018 (3Q19) with a net profit at RM53.3mil., a huge step up compared to the RM309.0mil. loss a year ago.

In a news article by The Edge Markets (12 Apr) earlier in the month, managing director Datuk Seri Syed Faisal Albar told the press that DRB-Hicom has a positive outlook, mainly hinged on the turnaround of its biggest loss-maker, Proton. Syed Faisal further said that the fourth quarter ended 31 March 2019 (4Q19) is “better than” the results for 3Q19.

In another article (The Edge Markets, 22 Apr), according to sources familiar with the tender, DRB-Hicom along with Sime Darby are front runners in the bid for the supply, repair, maintenance and management of the government’s vehicle fleet for a concession period of 15 years. Further in the article, another source said that DRB-Hicom has the upper hand as it is still the largest shareholder of Proton, which makes up most of the vehicle types required by the government.

In addition, Proton unveiled the facelifted Iriz and Persona on Tuesday (23 Apr), as part of its plans to maintain the momentum of the brand’s revival and to attract more consumers (The Malaysian Reserve, 24 Apr). The updated models were rolled out in collaboration between Zhejiang Geely’s studios and Proton’s in-house design division. The Iriz 2019 is priced from RM36,700 to RM50,700, whereas the new Persona debuts from RM42,600 to RM54,600.

Source: Macquarie Research - 25 Apr 2019