MARC is making its assessment based on FY18 results and financial position of DRB. What they are saying is actually known already by most investors in the market.
I think they are still skeptical on Proton turnaround plan. To be fair to DRB, results of the turnaround plan can only be seen in 2019 when the new SUV is launch to the public.
I think the 2Q19 result (should be out next week) will still be negative for Proton even with the tax holiday period . We will still need to assess on management decision to absorb the SST from September (would mean that gross margin will drop by 3-4%). Based on the September car sales numbers, the strategy actually backfired as sales still drops vs august period (4,524 cars sold in Sept 18 vs 9,501 cars sold in Aug 18). For those that are invested in the company due to the potential turnaround of Proton, you need to be fair to DRB and give them at least another 6 months (or until 4Q19 is out) to see the result.
All in all, 2Q19 should be a bumper profit period due to the RM700mil gain in disposal of Alam Flora back in August. That being said, core business results would still be negative.
In terms of valuation, you can only value this company based on the book value method as core earnings is still negative. At a P/B of 0.6x it does look undervalue but take not this "value" can only be unlock if the company decides to sell/disposed of the assets as what they did with Alam Flora. If there is no disposal during Oct-Dec period, DRB would most probably record a negative result in 3Q19.
Feel free to comment if i might have miss out anything. Thanks
"IF".... QR good.. road to RM2.20 range in 1-2 weeks time open. Once 12/12 another round price will up due to x70 official announcement px. So my view RM2.30-2.50 for DRB coming soon.
Proton revenue went up substantially (70%) compared to last year but mainly due to the positive effect of tax holiday. Expect Proton revenue to taper down in this quarter. All this is expected.
Positive catalyst will come from the potential demand from X70. Currently there is already more than 10,000 bookings for the SUV but we need to wait and see whether these bookings can be converted to firm orders by customers (still don't know the pricing of X70 yet).
As mentioned previously, the full turnaround effect of Proton (which would mean the turnaround of DRB Hicom) can only be seen in 2019 once the X70 is launched. So financial wise you can only see the effect in 4th quarter FY19 (period Jan - Mar 2019).
So those that are investing in the company for the potential turnaround need to wait for 4Q19 result to be out to see the full effect of the turnaround plan by Geely (result to be out end May). Proton still has licence to sell 2 other Geely car models but this is only expected to be launch in 2020 the earliest.
Those that would want an indirect exposure to Proton can buy either Pecca or MBMR. Which are both profitable companies.
Pecca is the main manufacturer for car leather seats in Malaysia. They might managed to clinch manufacturing contracts for the X70 once Proton decides to start manufacturing the vehicle in Malaysia next year (most probably mid of the year). Currently the company's domestic exposure is mainly driven by Perodua and Toyota sales. They also export their products overseas.
MBMR has always been the auto component manufacturer for Proton (via their subsidiary Hirotako Holdings where they manufacture the airbags, seatbelt etc). Currently both companies are still negotiating on the potential of MBMR supplying the alloy wheels for the X70 (still not finalise due to pricing issues ). MBMR is also a direct proxy to Perodua given it has a 22.6% interest in Perodua. Currently valuation is cheap at below 5.5x PE (2018 expected PAT of RM145mil. 9m PATAMI is already RM106mil). The company is also expected to launch their own SUV priced at between RM70k to RM80k (so not really a direct competitor to x70).
Even after Geely join DRB every qtr DRB suffer loss why EPF can push high-high? Some of those commenting here work for EPF/TH behind pushed DRB from 90 sen?
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Posted by HYG > 2018-11-23 21:38 | Report Abuse
Good or bad news?