DRB-Hicom Bhd is most likely to sell a controlling
stake in Proton Holdings Bhd to French auto giant PSA Group, which produces
Peugeot cars, according to sources.
“PSA
is ready to invest a lot of money in Proton and build a new plant in Tanjung
Malim, Perak. It has presented the best proposal to rescue and expand Proton’s
operation in Asean,” the source says.
But
Chinese car manufacturer Geely Automobile Holdings Ltd, the other contender to
buy a 51% stake in Proton, may be offered a proposal to take over Lotus from
Proton.
In
earlier negotiations with DRB-Hicom, Geely had expressed more interest in
acquiring Lotus, which produces sports cars, rather than the whole of Proton.
“Proton
is of no use to Geely. It wants Proton because of the auto technology in Lotus.
And for PSA, which is strong in sport-utility vehicles (SUVs), it is not keen
on Lotus,” says the source.
Indeed,
China’s government has been encouraging its auto companies to acquire
technology that it lacks. The auto sector has been identified as a weak segment
within its manufacturing sector.
Invitation
by DRB-Hicom for bids to be Proton’s strategic partner closed two days ago.
Only PSA and Geely have submitted their proposals, according to press reports.
Proton
started the exercise to get a foreign strategic partner more than six months
ago after the government gave it financial assistance of RM1.5bil to pay off
the vendors of the troubled national car manufacturer…Can Proton do it this time?
All eyes are on
who national carmaker will select as its strategic partner.
In evaluating the potential
partners, DRB-Hicom will insist that the Proton badge and its technology will
be expanded into Asean markets first and the global arena subsequently. - DRB-Hicom
A NEW technical partner for Proton
Holdings Bhd could be a catalyst for DRB- Hicom Bhd. For one thing, it would
reduce the impact of Proton’s losses on DRB- Hicom.
For another, it will immediately increase
Proton’s underutilised assembly plant in Tanjung Malim.
In addition, a collaboration with a new
partner could open a new opportunity for the group to expand into Asean markets
- which will mean better sales for the national car manufacturer.
These are among the factors for the
potential upside of DRB-Hicom stock, which has been trading at a discount to
its asset value for years, with investors shying away from the stock on issues
such as Proton’s financial struggles.
At the current share price of RM1.26
apiece, DRB-Hicom is valued at a price-to- book value (P/BV) of 0.41 times,
lower than the automotive sector’s at 0.7 times P/BV.
Despite seemingly cheap valuations for a
company with strategic assets in automotive and logistics services, it is worth
noting that DRB-Hicom is a loss-making one.
For the first half of its financial year
ending March 31,2017, the company’s net losses widened to RM478.9mil from
RM15.8mil a year earlier.
Revenue during the period fell by a
billion ringgit to RM5bil due to lower vehicle sales.
Nonetheless, five out of six analysts surveyed
by Bloomberg have a “buy” call
on DRB-Hicom, with a consensus target price of RM1.49.
Apart from Proton, DRB-Hicom also assemble
international marques such as Honda, Toyota and Volkswagen.
DRB-Hicom had announced earlier that it
aims to reduce its dependence on the automotive segment, which is vulnerable
to economic cycles, and that it wants to raise revenue contributions from
logistics.
Presently, the automotive and property
businesses contributed 81% to the group’s total annual revenue, while the
remaining 19% is from its services segment that include logistics and financial
services.
In DRB-Hicom’s results for FY16 ended
March 31, the firm posted a net loss of RM991.9mil from RM300.2mil in FY15.
During the period, its automotive segment
booked almost RMlbil operating losses.
Excluding its automotive’s RMlbil loss,
DRB-Hicom should have made a RM370.5mil profit.
With local car sales on the downtrend and
the continuous effort to liberalise the automotive segment, the national
carmaker has no choice but to buck up.
The biggest question is can the new partnership
turn around Proton, which has been suffering from declining sales, losing
market share and is in dire need of a partner with the technical expertise to
make it more competitive.
In 2016, Proton sales dropped by 30% to
72,290 cars from 102,174 units in 2015, and lost its market position to Honda.
“What Proton needs is a foreign strategic
partner that can help Proton with a new model development, technology transfer,
management of development costs, implementation of a more cost effective
manufacturing processes, penetration of new markets and revitalise the Proton
brand,” RHB Research analyst Alexander Chia says.
He says a typical car manufacturer would
have an average product life cycle of about six years.
“Proton’s products typically have an extended
life cycle due to a lack of economies of scale where it takes a longer time to
sell the requisite number of units to adequately amortise development costs.
“Towards the latter part of this extended
life cycle, Protons’ products have become increasingly uncompetitive as they
get left behind by newer competing products.
“They need wholesale improvement in
manufacturing scale to remain competitive in a demanding market,” Chia says.
For Proton to break even, he says the firm
needs to produce at least 100,000 -120,000 cars per year.
Proton has already been exporting its cars
to Brunei, Australia and Chile, but not in a big way.
Another analyst says that the development
cost for a new model such as Proton Iriz cost about RMSOOmil and that it needs
to sell at least 200,000 units within five years with the development cost per
unit at around RM3,000.
Note that Proton is currently in the midst
of finalising a technical partner that could be in the form of China-based
Geely or PSA Group of France.
The requirement to collaborate with a well
known strategic partner was imposed upon Proton as part of the conditions
issued by the Government for its approval of an RM1.5bil soft loan to Proton,
in which a bulk of the money would be used to pay its vendors.
Aside from fulfilling the condition, DRB-
Hicom wants a collaborator that can provide a strategic, operational and
cultural fit to the national carmaker.
“This strategic fit will also ensure that Proton
can achieve economies of scale from its domestic operations.
“In evaluating the potential partners,
DRB-Hicom will insist that the Proton badge and its technology will be expanded
into Asean markets first and the global arena subsequently,” DRB-Hicom said in
a statement on Tuesday.
Questions remain on what kind of partnership
Proton is eyeing, would it be similar to Perusahaan Otomobil Kedua Sdn Bhd
(Perodua) and Daihatsu’s partnership.
Under the partnership, the Japanese car-
marker owns a 51% stake in Perodua’s plant in Rawang, and the latter holds the
remaining 49%.
“Daihatsu also provides technical and
technology supports for Perodua.
“Perodua is now the biggest carmarker in
Malaysia,” a market observer notes.
In 2016, Perodua sold 207,110 cars in
Malaysia with a market share of 40.3%.
It is learnt that both Geely and PSA want 51%
in Proton’s manufacturing plant in Tanjung Malim.
“The details of the partnership are not
available yet, but it is worth noting that both carmakers are established
players in their respective markets,” an analyst says.
The analyst says that while there are
scepticisms in the market over China branded products, Geely, which took control
of Volvo brands in 2010, has steered the Swedish-based company to achieve new
record sales in 2016.
“Volvo has taken investment in new models
and plants backed by Geely’s financial muscle,” he says.
When Geely bought Volvo from Ford, the
Swedish carmaker was a loss-making one.
Meanwhile, PSA, the manufacturer of
Peugeot and Citroen, is Europe’s second largest car producer, having sold three
million cars in 2016.
Between 1996 and 2000, Proton developed
the Tiara cars, which was a collaboration with Citroen AX.
Nonetheless, successful bidders would gain
access to Proton’s crown jewel asset - the Tanjung Malim plant, which has an
annual production capacity of 150,000 vehicles.
The plant was designed to have a maximum
capacity of one million units per year.
It is said that by owning a car assembly
in Malaysia, any new technical partner of Proton would have immediate access to
production capacity and that qualifies it to ship vehicles tax-free in Asean.
Any new partner of Proton could be a
catalyst for DRB-Hicom, especially in terms of cutting its production risks.
But, it would take at least a few years
for Proton to turn around.
The carmaker sold 99,700 vehicles in the first half of 2017 (1H17), up 2.4%, compared with 97,400 units sold in 1H16. Perodua sold a total of 207,100 vehicles last year.
“The Perodua Axia model is our best-selling model so far this year. We are cautiously optimistic of achieving our initial sales target of 202,000 for 2017,” he told a press conference on Perodua’s 1H17 Performance here today.
Based on Perodua’s internal estimation, Aminar Rashid said the total industry volume (TIV) for 1H17 improved 2.3 per cent to 284,200 vehicles compared with 275,500 vehicles recorded in 1H16.
The car marker’s current market share stood at around 35.1%.
He said sales momentum in 1H17 was good as all Perodua models were number one in their respective segments, with 32,00 units of the Axia model sold followed by Bezza (28,300 units), Myvi (24,000 units) and Alza (14,700 units).
Aminar Rashid said the increase in sales was due to aggressive campaigns initiated by automotive players which included the introduction of new models and clearing 2016 stocks by offering attractive discounts and trade-ins.
“Despite the improvement in sales, tighter loan guideline is still our greatest challenge to overcome as most of our customers are first-time buyers,” he said.
On its after-sales-service, he said Perodua saw 1.02 million vehicles patronised its service centre in 1H17, an increase of 1.2 per cent from 1.01 million units serviced in 1H16.
He added that Perodua had exported 1,854 vehicles to six countries in 1H17. “The recent introduction of the Bezza model in Mauritius and Sri Lanka has been well received, and we have respectively sold eight units and 79 units in both countries,” Aminar Rashid said.
He added that Perodua produced 96,600 vehicles in 1H17 and expected to produce 197,000 units by year-end. - Bernama
Read more...
Friday, 14 July
2017 | MYT 3:13 PM
KUALA LUMPUR: Perusahaan Otomobil Kedua Sdn Bhd
(Perodua) is on track to achieve its sales target of 202,000 units this year
despite the continuous challenging economic environment, said president/CEO
Datuk Dr Aminar Rashid Salleh.The carmaker sold 99,700 vehicles in the first half of 2017 (1H17), up 2.4%, compared with 97,400 units sold in 1H16. Perodua sold a total of 207,100 vehicles last year.
“The Perodua Axia model is our best-selling model so far this year. We are cautiously optimistic of achieving our initial sales target of 202,000 for 2017,” he told a press conference on Perodua’s 1H17 Performance here today.
Based on Perodua’s internal estimation, Aminar Rashid said the total industry volume (TIV) for 1H17 improved 2.3 per cent to 284,200 vehicles compared with 275,500 vehicles recorded in 1H16.
The car marker’s current market share stood at around 35.1%.
He said sales momentum in 1H17 was good as all Perodua models were number one in their respective segments, with 32,00 units of the Axia model sold followed by Bezza (28,300 units), Myvi (24,000 units) and Alza (14,700 units).
Aminar Rashid said the increase in sales was due to aggressive campaigns initiated by automotive players which included the introduction of new models and clearing 2016 stocks by offering attractive discounts and trade-ins.
“Despite the improvement in sales, tighter loan guideline is still our greatest challenge to overcome as most of our customers are first-time buyers,” he said.
On its after-sales-service, he said Perodua saw 1.02 million vehicles patronised its service centre in 1H17, an increase of 1.2 per cent from 1.01 million units serviced in 1H16.
He added that Perodua had exported 1,854 vehicles to six countries in 1H17. “The recent introduction of the Bezza model in Mauritius and Sri Lanka has been well received, and we have respectively sold eight units and 79 units in both countries,” Aminar Rashid said.
He added that Perodua produced 96,600 vehicles in 1H17 and expected to produce 197,000 units by year-end. - Bernama
Read more...
With the Government owning 79% of Proton, the haemorrhage will ... an ever
ready supply of financial assistance to keep Proton afloat.
One of the biggest problems Proton is grappling with is
perception. The quality ... What it wants most out of its dealers and vendors
is financial ...
A NEW technical partner for Proton
Holdings Bhd could be a catalyst for ... away from the stock on issues such as Proton's financial struggles.
But there are potential trouble spots and several financial executives see the recent
bailout of Proton as acknowledgement by the government ...
KUALA LUMPUR: PROTON is in dire straits, the
government ... yet on the troubled carmaker, calling the problems besetting Proton as very ... faced by Proton and its inability to establish
a solidfinancial footing,” Mustapa said.
“Even then, it has come to my
attention that some of the vendors may face seriouschallenges if Proton continues to operate at the
current level ...
Malaysia Intent on Severing Financial Ties to Proton ... Proton could pay vendors facingfinancial problems because of Proton's declining sales.
Economic Problems faced by Proton. Automobile is considered as one of the fast consuming product all
around the world. The first vehicle to ...
Who can solve Proton's problems? ... Proton should be king of Malaysia's
roads, thanks to the steep tariffs and excise duties imposed on ...
Big Bets on Proton Therapy Face Uncertain Future - WSJ
Big Bets on Proton Therapy Face Uncertain Future - WSJ
Six new proton-beam centers are set to start
delivering state-of-the-art radiation to U.S. cancer patients in coming months.
The projects—many ...
Proton and Government's Injection...
Proton and Government's Injection...
DRB-Hicom expects government to inject $61.3 million
in Proton by ... avenue as it allowsProton to raise
funds without the need to service the ...
KUANTAN: National car producer Proton will need a huge
capital ... and continued protection from the government to enable it
to continue to ...
www.wsj.com/.../malaysia-government-to-inject-up-to-307-million-into-auto-maker-pro...
Jun
6, 2016 - The Malaysian government plans to inject up to $307
million into Proton Holdings by subscribing to convertible debt to be issued by the
auto ...
“It is a major request and the government needs to be
thorough with its evaluation as a lot of .... Gov inject 14b, how much Proton gave back?
PETALING JAYA: Proton Holdings Bhd, an automotive arm
of DRB-Hicom Bhd, will receive RM1.25 billion from the government through
the ...
Global brand: What Proton needs is a foreign
takeover that can help it transform ... He pointed out that after all these
years, the Government was still ... was announced in June as a cashinjection for the
loss-making carmaker.
Purchase Proton for 1.29 billion than ask for 3.00 from government. That is ......
rich BUT wants to enslave Malaysians with another BAILOUT.
National car producer Proton will need a huge
capital injection from the private sector and continued protection from the government to
enable ...
KUALA LUMPUR: The launch of the all-new Proton Perdana could
usher in a new ... “The urgent need for the cash injection laid bare the
fact that there are serious ... Najib said this forced thegovernment to step in,
“to protect ...
TO MEET THE NEEDS OF THE LONG BASELINE NEUTRINO.
PROGRAM∗ ... prebys@fnal.gov .... Figure
4: Maximum injected protons as a function of injec-.
Proton is of no use to Geely yeah. It wants Proton because of the auto technology in Lotus. I can see it from the Proton X50 price.
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