DRB-HICOM (DRB MK, TRADING BUY, TP: MYR1.71)
Who Will The OEM Partner Be?
Results Review
After cuts to our earnings and changes for its equity stake in Pos Malaysia and Corwin Holdings, our SOTP-derived TP falls to MYR1.71 (from MYR2.00, 74% upside). A significant re-rating catalyst – in the form of the potential OEM partnership (results to be announced in 1H17) – is pinned on expectations for the partner to provide equity injection into Proton and thus reduce DRB-Hicom’s stake of Proton losses in the near term. We expect news flow to remain positive in the coming months, coupled with a steady stream of bookings for its newly launched models. While the longer-term outlook remains uncertain, its share price may exceed 15% for the next 3 months. We change our recommendation to TRADING BUY (from BUY).
Success in Stock Market through Value Investment
Thursday, 1 December 2016
DRB-HICOM
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