Drb-hicom

*DRB-HICOM (DRB MK, BUY, TP: MYR2.77)*
A New Dawn
Company Update
DRB-HICOM’s (DRB) binding heads of agreement with Zhejiang Geely (Geely) in respect of the sale of a 49.9% stake in Proton, marks a new beginning for the beleaguered national auto maker. Geely would pursue its expansion into ASEAN markets through Proton, which would be able to leverage on Geely’s advanced technology, business network and global best practices. DRB would be able to separately monetise non-core assets extricated from Proton including land, businesses and concurrent sale of Lotus. DRB expects to conclude the definitive agreement by July. After factoring in the additional value of extricated assets and the Government’s partial reimbursement of R&D costs in our SOP estimate (including 10% holding company discount), we raise our TP to MYR2.77 (from MYR1.83, 65% upside). Upgrade to BUY (from Trading Buy).