DRB... time to buy??

We maintain BUY on DRB-HIcom Bhd, with a fair value of RM3.65/share – a 15% discount to our SOP value of RM4.31/share..>>> Source: AmeSecurities

We maintain our BUY rating and TP of RM3.60 which is based on a 20% discount to SOP... Source: HwangDBS Research - 16 Aug 2013

DRB-Hicom raises sales target for Proton cars

KUALA LUMPUR: In a bid to establish Proton Holdings Bhd as the number one car maker in terms of sales this year, DRB-Hicom Bhd has raised the local sales target for the national car maker to 200,000 units for the current financial year ending March 31, 2013.

DRB-Hicom Managing Director, Datuk Seri Mohd Khamil Jamil said the conglomerate, which acquired Proton from Khazanah Nasional Bhd in January this year, believed that Proton has the ability to overtake the current leader, Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

Mohd Khamil said prior to the takeover, Proton had an initial target of 167,000 units for the current fiscal year.

"From January to now, we have done about 100,000 cars. I am pretty sure about the target. Proton has a lot of unlocked potential.
"The main challenge to meet the target will be the revised lending guidelines by Bank Negara Malaysia. But we believe in the current models that we have," he told reporters after the company's Annual General Meeting, here today.

Mohd Khamil said DRB-Hicom aspires to establish Proton not only as an affordable car, but an international car.

"Nobody should buy Proton because it's cheap. The DNA of Proton must be changed. That is why we are raising the standards of the car. Proton aspires to increase quality while keeping cost down," he added.

He also said DRB-Hicom has in place several plans for the national car maker, which among all are to strengthen its domestic operations, rationalising its downstream and upstream businesses, building greater brand awareness, as well as unlocking its true value.

On Proton's loss-making sports car unit, Lotus, Mohd Khamil said DRB-Hicom has completed the operational review of the British sports car maker, and the conglomerate has laid out an immediate plans for Lotus.

"It will be far different from the plans that Lotus had before. The new plan will ensure Lotus will sustain for the next three years.

"We have to now present the plans to the bankers. We are hoping to finalise negotations with the bankers by the end of this year," he added.
-- BERNAMA

Read more: DRB-Hicom raises sales target for Proton cars

DRB-Hicom to sell 30% Bank Muamalat stake?

KUALA LUMPUR: Malaysia’s auto-to-insurance conglomerate DRB-Hicom plans to sell 30 percent of its 70 percent stake in partly state-owned Islamic lender Bank Muamalat Malaysia, a source with knowledge of the deal said on Thursday.

Malaysia’s central bank last month gave the country’s ninth-largest Islamic bank, AFFIN Holdings, permission to enter talks with DRB-Hicom, which has been told by the central bank to reduce its stake to a maximum of 40 percent.

DRB-Hicom bought its 70 percent stake in Bank Muamalat from Bukhary Capital in 2008. The government’s investment holding arm Khazanah Nasional owns the other 30 per cent.

“The matter is in Bank Negara’s (Malaysia’s central bank) hands now,” the source told Reuters, adding that a deal should be completed by the end of the year.
DRB-Hicom, controlled by billionaire Syed Mokhtar Al-Bukhary, had tried to reduce its stake in Bank Muamalat with a sale to Bank Islam Malaysia last year and previously to Bahrain-based Islamic lender Al Baraka Banking Group.

Should the deal go through, Affin would emerge as Malaysia’s fourth-largest Islamic lender by assets.

Read more: DRB-Hicom to sell 30% Bank Muamalat stake?

 

AmBank issues 7 put & call warrants

AmBank (M) Berhad (“AmBank”) is issuing seven new European style cash-settled structured warrants to meet investors’ demand for trading opportunities and alternative investments for the current market.

Under AmBank’s Put-Call Pair Programme, there will be three pairs of put and call warrants (the “PW” and “CW”
respectively) over the ordinary shares of Dialog Group Berhad (“DIALOG”), DRB-HICOM Berhad (“DRBHCOM”) and Malaysia Marine and Heavy Engineering Holdings Berhad (“MHB”).

There will also be a CW issued over the ordinary shares of TanChong Motor Holdings Berhad (“TCHONG”). The structured warrants on DIALOG, DRBHCOM and MHB will have tenures of approximately eight months while the call warrant on TCHONG will have a tenure of approximately twelve months. The structured warrants will be listed on 1 July 2011 with issue size of up to 100 million each.

“For AmBank’s upcoming tranche of structured warrants, we are issuing three put and call warrant pairs on DIALOG, DRBHCOM and MHB under our Put-Call PairProgramme, all of which have seen significant trading interest recently on the back of the Malaysian government’s ETP initiatives and M&A activities.

However, as market sentiment remains uncertain and conditions volatile over fears of a slowdown in global growth and Eurozone debt issues, AmBank’s put-call pair programme enables investors to profit on both the ups and downs of share price movements.

AmBank’s put warrants can also be used by investors to hedge their exposure to the underlying share. Each put and call warrant pair is issued with the same strike price over the underlying share,” said Ms Ng Ee Fang,Director/Head, Equity Derivatives, AmInvestment Bank Berhad.

Oil and gas services company DIALOG recently signed a RM1.9 billion agreement to provide engineering, procurement, construction and commissioning (EPCC) works for the first phase of a deepwater petroleum terminal at Pengerang, Johor. The
construction cost of RM1.9 billion is higher than management’s earlier guidance of RM1.7 billion with the schedule of completion extended from end-2013 to 2014.

The first phase of the terminal will have a capacity of 1.3 million cubic metres and will comprise a harbour port, jetty and other marine facilities with waterdepth up to 26 metres. Besides the Pengerang tank terminal project, DIALOG couldalso be potentially involved in the Bentara/Balai marginal field development.

AmBank’s CW and PW on DIALOG are both priced at 15 sen each with gearing of 6.09 times.

Major oil & gas fabricator MHB’s acquisition of Sime Darby’s 130-acre Pasir Gudang yard for RM399 million cash is expected to transform Malaysia’s fabrication landscape. Along with Petronas’ Teluk Ramunia yard, MHB will have access to Malaysia’s largest domestic fabrication yard of 672 acres. Petronas’ capex programme of RM250 billion for the next five years points to an abundance of new projects for fabrication yards. Therefore, MHB’s capacity expansion from the Pasir Gudang yard acquisition is expected to accelerate order book recognition, enhance deepwater capabilities and drive margin efficiencies.

AmBank’s CW and PW on MHB are both priced at 15 sen each with gearing of 5.69 times.

Conglomerate DRBHCOM had recently won the bid for Khazanah Nasional’s 32.2% stake in POS Malaysia. With its stake in POS Malaysia, DRBHCOM subsidiary Bank Muamalat can leverage on POS Malaysia’s extensive network of branches to reach a wider consumer base. POS Malaysia also has an attractive land bank with
potential for commercial development. DRBHCOM’s automotive joint-venture with Volkswagen AG to assemble Volkswagen vehicles is slated to start production towards the end of 2011. AmBank’s CW and PW on DRBHCOM are both priced at 15 sen each with gearing of 5.02 times.

Automotive assembler and distributor TCHONG posted strong quarter-on-quarter earnings growth of 53% for Q1 2011 (ended 31 Mar 2011) on the back of a 36% increase in sales revenue. Strong demand for its high-end CKD Teana model also helped boost average selling prices for its vehicles by 19%. For Q1 2011, 1,790 units of Teana were sold compared with only 476 units in Q4 2010. Although parts supply was disrupted by the major Japan earthquake and tsunami in March, parts supply from Nissan to TCHONG is expected to return to normal by July. As for TCHONG’s operations overseas, subsidiary Nissan Vietnam Ltd. is breaking even at EBITDA level. AmBank’s CW on TCHONG is priced at 15 sen each with gearing of 3.77 times.

This offer is aimed at sophisticated traders who want to trade on the direction and volatility of DIALOG, DRBHCOM, MHB and TCHONG. The new CWs and PWs have gearings ranging between 3.77 and 6.09 and are targeted at investors who want leveraged exposure to the underlying on both the upside and downside. - Bloomberg

Read more: AmBank issues 7 put & call warrants

RHB Research initiates coverage on DRB-Hicom with outperform rating

KUALA LUMPUR: RHB Research has initiated coverage on DRB-HICOM BHD [] with an outperform recommendation at RM2.30 with a fair value of RM3.15 and said the company had significant dealflow potential that could continue to yield new business contracts going forward.

Read it in The Edge

DRB-HICOM, VW to assemble Passat in November

PEKAN: DRB-HICOM and Volkswagen AG will start production in November with the assembly of Volkswagen Passat sedan 1.8 litre at the automotive complex in Pekan.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed described it as an important development especially for the country's automotive industry.

“This is the result of a collaboration between DRB-HICOM with Volkswagen sealed in December last year. There are now 20 personnel from VW AG's headquarters here to discuss and finalise the production operations expected to take place this November,'' he told reporters after a tour of DRB-HICOM Automotive Complex here yesterday.

A collaboration and licence agreement with Volkswagen worth RM1bil was signed last year following a memorandum of understanding by both parties in August to study the feasibility of locally producing Volkswagen passenger cars in Malaysia.

DRB-HICOM and Volkswagen have agreed to share costs in a ratio of 70% to 30%, respectively.

The Pekan plant is expected to manufacture between 40,000 to 50,000 Volkswagen cars annually.

DRB-HICOM group chief financial officer Datuk Lukman Ibrahim, in his speech earlier, said the recent collaboration with Volkswagen would witness the assembly of selected Volkswagen cars in the plant.

“With the CKD (completely knocked down) plan in place, both parties have agreed to systematically expand the Volkswagen production as well as its localisation plan.

“This will not only create new job opportunities, in particular for Pekan but also stimulate our local automotive manufacturing industry via introduction of better technology, quality products and standards,'' he added.

He also said the deal was a private-funding initiative, in line with the Government's call to boost the country's economy and for that, Volkswagen would invest RM300mil at each stage of the joint venture.

Read more

Ambank Issues Eight New Call Warrants

Read more

DRB-HICOM sees efficiency in Pos tie-up

PETALING JAYA: DRB-HICOM Bhd, which has put in a bid for Khazanah Nasional Bhd's 32% stake in Pos Malaysia Bhd, sees potential efficiency gains in the partnership, said sources.

The company, which has several concessions such as Alam Flora, Puspakom, Hicom Power and KL Airport Services, was also comfortable and familiar with operating units that had the Government's golden share, added sources.

StarBiz reported in October that the planned divestment by Khazanah was taking longer than expected due to negotiations surrounding the Government's golden share in Pos Malaysia. Golden shares are typically held by the Government, giving it veto power in major decisions of the company.

In a report issued yesterday, OSK Research Sdn Bhd said Tan Sri Syed Mokhtar Albukhary was rumoured to be the frontrunner in the 32% stake sale, with the deal costing some RM700mil.

Read more...

DRB-HICOM set to seal deal with VW

DRB-HICOM Bhd is scheduled to sign a definitive agreement on December 21 with Volkswagen AG, Europe's largest carmaker, to assemble VW cars in Malaysia.

The cars will be assembled in Pekan, Pahang, for local and Southeast Asian markets.

"Tentatively, it is scheduled for December 21 with the signing ceremony being held either in the KLCC area or at DRB-HICOM's (1619) operational headquarters in Glenmarie, Shah Alam," said the source.

It is understood that DRB-HICOM's top officials from its automotive divisions are currently abroad for the final leg of negotiations with VW.

........

Yesterday, HwangDBS initiated coverage on DRB-HICOM with a RM3.55 target price.

The research house said DRB-HICOM is the cheapest conglomerate in the country with a net gearing of 0.3 times.

"With efforts to be more investor-friendly now, we expect a significant re-rating from its bargain basement valuation of 5.5 times 2012 financial year's earnings per share," Hwang said in the report.

The research house added that a key catalyst for DRB-HICOM is the conversion of a letter of intent from the Ministry of Defence for 257 AV 8x8 armoured wheeled vehicles, worth about RM8 billion.

Read more: DRB-HICOM set to seal deal with VW

DRB-HICOM seeks revenue balance

By Shahriman Johari

DRB-HICOM Bhd (1619) plans to improve the balance of revenue contribution from its services, automotive and property businesses over the next five years as it seeks to expand.

Currently, its motor vehicle business makes up some 57 per cent of revenue, followed by its banking, insurance and power plant maintenance services at about 40 per cent.

Property makes up less than 2 per cent of revenue now, but DRB-HICOM wants to boost this to 20 per cent in five years.

"I never like to put all my eggs in one basket," group managing director Datuk Seri Mohd Khamil Jamil told reporters at a briefing in Kuala Tahan, Pahang, yesterday.

DRB-HICOM, controlled by Tan Sri Syed Mokhtar Al-Bukhary, reported net profit of RM472 million in the financial year to March 31 2010, 29 per cent down from the year before mainly because it gained almost RM600 million from an asset sale last year. Revenue hit a record of RM6.3 billion.

The group plans to launch properties with a total gross development value of RM9 billion over 10 to 15 years. This will be a mix of residential and commercial properties. It has some 607ha near Mount Austin, Johor, which will be developed into a new township. "There are still pockets of land in DRB which are very prime," Mohd Khamil said. They include a piece of land in Taman Wahyu in Jalan Tun Razak, Kuala Lumpur, and tracts of land in Shah Alam, Selangor. This month, it plans to launch Glenmarie Gardens, a high-end bungalow project.

As for its motor vehicle business, it aims to sign a definitive agreement with Europe's Volkswagen AG (VW) next month. VW had signed in August a memorandum of understanding with DRB-HICOM to produce VW cars from 2012 at the group's plant in Pekan, Pahang. "The final negotiations are going on well and the parties are finalising the terms," he said. Eventually, the deal may include the export of VW cars to Asean countries, among other things.

DRB-HICOM is also still looking for a foreign partner to buy 30 per cent of its Islamic lender, Bank Muamalat Malaysia Bhd. It holds 70 per cent of the bank currently. It was in talks with five foreign parties and one local firm, but the talks fell through amid the global financial crisis last year.

Asked about the weak performance of its stock, Mohd Khamil said it could be due to the fact that the group was too diversified. It is also classified under the industrial sector on Bursa Malaysia although services have become a big part of its business. "If shareholders understood the nature of our business, the share would definitely escalate and show their true value," Mohd Khamil said. Apart from Syed Mokhtar with 55.92 per cent, its other main shareholders are the Employees Provident Fund with 9.11 per cent and Khazanah Nasional Bhd with 5.13 per cent, according to its 2010 annual report.

Taken from here...

DRB Hicom upbeat on financial results

Automotive based group DRB Hicom Bhd is confident of surpassing last year's operating profit of RM457 million in the current financial year ending March 2011.

It said the projection was based on the positive performance in the first quarter ended June 30, 2010 and the much-improved results of its subsidiaries and its continuing group-wide efforts to improve.

Group managing director Datuk Seri Mohd Khamil Jamil said the pre-tax profit for the first quarter ended June 30, 2010, was a 157 per cent jump at RM223.475 million compared with RM86.988 million in the same quarter of 2009.

DRB Hicom also recorded its highest ever operating profit of RM457 million for the financial year ended March 31, 2010 while profit before tax was at RM657 million.


"We are trying to rationalise between automotive and other businesses because automotive is a very volatile business and the margins are very low," he told reporters after its 20th Annual General Meeting in Shah Alam today.

Despite the difficult operating environment, the group managed to grow its businesses especially in the services sector with a 3.5 per cent increase in revenue to RM6.31 billion from RM6.1 billion in the previous financial year.

Meanwhile, Mohd Khamil said the company was also looking at new joint ventures with another automotive company in Asia and hoped to finalise it soon.

"We are now negotiating with the company and we have done a lot of feasibility studies and costing," he said, adding that some details were being looked into now.

On the possibility of Proton acquisition, he said for now the company was focusing on Volkswagen and UK-based POTENZA Sports Cars Ltd to develop its automotive sector.

"Proton is being very well managed by its current management under Datuk Syed Zainal," he said.

"Whether we acquire Proton or not we will always work together as we are one of the main vendors and suppliers to Proton parts and components, and a retailer," he added.

On Bank Muamalat disposal, the company has written in to Bank Negara to ask for an extension on the period for the divestment of its 30 per cent interest in Bank Muamalat.

Would be potential acquirers of the equity have been slowed down by the economic slowdown, he said, adding that the bank was looking at a strategic partner who can also bring their management, products and technical expertise.--Bernama

Read more: DRB Hicom upbeat on financial results

DRB-Hicom Official: Expect To Sign Assembly Pact With Volkswagen By Year End

KUALA LUMPUR (Dow Jones)--DRB-Hicom Bhd (1619.KU) expects to sign a definitive agreement with German auto maker Volkswagen AG (VOW.XE) for the assembly of Volkswagen vehicles in Malaysia by the end of the year, DRB-Hicom Managing Director Mohd. Khamil Jamil said Wednesday.

"We hope to conclude the agreement by year end and the first rollout may be towards the end of 2011," Khamil said at a news conference after the company's general meeting.

DRB-Hicom aims to have an annual production capacity of 30,000 Volksawgen units by 2015, he added. DRB-Hicom is one of Malaysia's largest car distributors and importers.

Khamil also said the automotive division of the diversified group will likely be a driver for both revenue and earnings in fiscal year 2011 beyond. "We are looking at another Asian automaker and are quite close to an agreement," he said, but didn't provide further details.

-By K.P. Lee; Dow Jones Newswires; 603-2026-1233; ankur.relia@dowjones.com

VW set to jump-start DRB-HICOM business

Although it was a memorandum of understanding (MOU), the initial deal with Volkswagen AG (VW) signals a revival of DRB-HICOM Bhd's (1619) auto business.

However, the division may not repeat its glory days when it made most of the group's profit because of changes in the industry and stiffer competition now.

In 2005, its auto division accounted for some 54 per cent of total revenue of RM4.6 billion while its operating profit made up about 70 per cent of the total.

Fast forward to 2010, although the business made up more than half of revenue, its share of operating profit has plunged to less than half of the total.

Now, the bulk of its profits come from subsidiary Bank Muamalat and its long-term contract to operate and maintain the Tanjong Bin power plant in Johor.

But DRB-HICOM has been steadily working on its auto division.

In April this year, it signed an MOUwith Potenza Sports Car Ltd to manufacture and distribute the latter's products, including hybrids and electric vehicles, locally.

Potenza makes the Westfield and GTM marques and both parties may want to manufacture Potenza sports cars for the Asia-Pacific market.

Later that same month, it made its first overseas shipment of Suzuki Swift 1.5L to Brunei. Senior company executives said that DRB-HICOM and its 40 per cent-owned Suzuki Malaysia Automobile Sdn Bhd (SMA) plan to make Malaysia the regional hub for Suzuki Motor Corp to export its cars to Southeast Asia.

This was followed by the Malaysian launch of the fully-imported Suzuki Alto 1.0L last week.

But its major coup appears to be the MOU with VW, which may lead to the assembly of VW cars at its plant in Pekan, Pahang.

For starters, this could be the Golf, Beetle and Passat models, as they are VW's best-selling cars in Malaysia, according to OSK Research.

It also thinks that VW plans to use Malaysia as an export hub for its sedan cars.

"As the deal now has been secured by DRB-HICOM, we opine that Volkswagen's intention to make Malaysia its sedan exporting hub has been firmed up, especially with the inking of the deal with DRB-HICOM as the last resort.

"We understand that the Pekan plant has an estimated production capacity of up to 60,000 units per annum, and it currently assembles the Suzuki and Mercedes marques," said analyst Ahmad Maghfur Usman in his report.

And winners from this collaboration would be auto-part players.

"The winners from the localisation of the Volkswagen production line in Pekan is especially the auto-part players that have established strategic tie-ups /joint ventures with foreign players such as Bosch and Autoliv (a worldwide leading airbag supplier)," Ahmad Maghfur said.

DRB-HICOM operates eight assembly plants which includes Mercedes, Honda, Isuzu Motors and Suzuki Motor vehicles and Yamaha Motor motorcycles.

Shares of DRB-HICOM have gained some 13 per cent so far this year, outperforming the broader market's 7.7 per cent gain in the same period.

Its stock closed 7.5 per cent higher to RM1.14 yesterday, its biggest jump in more than four months.

3 VW models to roll out of DRB-Hicom plant

Three new Volkswagen models are expected to roll out of the DRB-Hicom plant in Pekan, thus strengthening the district's position as a regional automotive hub.

Prime minister Datuk Seri Najib Tun Razak said assembling of CKD (complete knock down) vehicle components of the renowned German brand would see the vehicles roll out of the plant by the end of the first quarter next year.

He said the joint venture was agreed upon after his meeting with Volkswagen top officials during his overseas holiday recently.

"I've always been monitoring the developments involving DRB-Hicom and during my recent vacation, I took the opportunity to meet the Volkswagen officials and ask them whether they were till keen to establish cooperation with DRB-Hicom.

"Actually, they were waiting for the indication from me whether they could sign the agreement with DRB-Hicom or not," he said in his speech at a Ramadan gathering with DRB-Hicom management and staff in Pekan today.

Also present was DRB-Hicom Berhad managing director Datuk Seri Mohd Khamil Jamil.

Yesterday, DRB-Hicom and Volkswagen signed a memorandum of understanding to cooperate in the assembly and production of Volkswagen vehicles in Malaysia.

Najib said Volkswagen also requested for incentives from the Malaysian government to make the DRB-Hicom production plant here its export base for the Asean region.

"This needs to be studied and approved by the government," he said.

Najib said the joint venture would also contribute to the success of the East Coast Economic Region's development plan based partly on continuous development of the local automotive industry.

In this respect, he said, the DRB-Hicom management and staff needed to carry out transformation to put the company's image at the highest level, thus building foreign manufacturers' confidence including those which had already established cooperation with DRB-Hicom like Suzuki and Mercedes-Benz, in the local automotive industry.

"Total commitment from all quarters is a vital ingredient for continuous success."

The prime minister then together with over 100 residents performed Tarawih prayers at the Batu 8 mosque in Pekan. -- Bernama

Between Proton and DRB

OSK: Affordable Luxury Cars If Discussions Between Proton And Volkswagen Materialises

KUALA LUMPUR, March 29 (Bernama) -- Skoda or even the luxury Audi at an affordable price range is possible, if discussions between Proton Holdings Bhd and Volkswagen to set up a completely knocked down (CKD) plant here materialises, says OSK Research.

Last week, Proton Chief Executive Officer, Datuk Syed Zainal Abidin Syed Mohamed Tahir confirmed that the company is in discussion with the German automaker.

"The feasibility of this potential tie-up is expected to be announced by the end of the first half of this year.

"If it materialises by 2011, the said plant will manufacture Volkswagen sedan vehicles catering to the domestic and export market, predominantly in the Asean region," the research house said in a statement, Monday.

It added that if Volkswagen does set up its hub here, the initial investment would be less than US$200 million.

"Last year, the company inked a partnership deal with IndoMobil to set up a CKD assembly plant in East Jakarta, Indonesia, to manufacture its MPV line-up at an initial investment of US$140 million.

"With its proposed CKD plant in Malaysia and noting the presence of an MPV manufacturing plant in Indonesia, we see the local facility catering to the production of the Sedan segment," the statement noted.

OSK also opined that Proton's Shah Alam plant is the most likely candidate for the CKD facility, as it is known for its established infrastructure.

Previously, Volkswagen had shown interest in Proton's manufacturing infrastructure, to establish a CKD hub catering for the Asian market.

In a related development, the up-trend in DRB-Hicom Bhd's share price has become more aggressive lately, on speculation of a strong possibility of the company securing a CKD deal with Volkswagen rather than Proton, says OSK Research.

"With both Proton and DRB in the picture, it remains to be seen which plant Volkswagen would eventually opt for," the statement added.

-- BERNAMA

DRB-HICOM up in a bear market

DRB-HICOM Bhd's (1619) shares rose amid a sharply lower market yesterday after the company confirmed that it was in early talks to sell its stake in Bank Muamalat to Bahrain-based lender Al Baraka.

The shares rose by 1 per cent to RM1.05 yesterday. There was a jump in volumes traded to 5.3 million shares, its highest in a day since September last year.

Its performance stood out amid a 1.1 per cent drop in the FTSE Bursa Malaysia KLCI, to 1,283.02 points.

DRB, essentially an automotive and property group, owns 70 per cent of the local Islamic lender while state investment firm Khazanah Nasional Bhd owns the rest.