DRB-Hicom‟s wholly-owned subsidiary, Proton, launched its new Proton Perdana model as the official car of the government yesterday. The news was anticipated as management had previously guided that the new Proton Perdana would be launched in Dec 2013. The new Proton Perdana is based on the eighth generation Honda Accord and is part of Proton‟s collaboration programme with Honda. We maintain our Outperform call on DRB-Hicom with an unchanged 12-month target price of RM3.53.

New Proton Perdana as official government car. Proton‟s new-look Perdana model was launched by the Prime Minister, Datuk Seri Najib Tun Razak, as the official government car yesterday. The new Perdana model comes in two variants, the Perdana 2.0L and Perdana 2.4L. Proton delivered the first batch of 200 units to the government. According to Proton executive chairman, Tan Sri Mohd Khamil, a total of 3,000 units would be delivered on a staggered basis over two years. He said the new Perdana will only be offered to the government under the first phase of Proton‟s plan to develop a new D-segment car.

New Proton Perdana for the public in 18 to 24 months’ time. Tan Sri Khamil mentioned that Proton had begun the second phase of the Dsegment model under a platform-sharing collaboration with Honda, with a completely new interior and exterior design. It is expected to be offered to the Malaysian public in 18 to 24 months time. This was already mentioned in our Nov 7 report on our visit to Proton‟s Tanjung Malim plant.

New Proton Global Small Car (GSC) model spotted on Malaysian roads. According to a prominent motor blog, Proton‟s upcoming B-segment hatchback has been sighted testing on Malaysian roads recently. Management has previously indicated that Proton‟s GSC model will be launched at end-1Q14 or 2Q14, depending on testing and supply chain. We believe the GSC model which is targeted at the popular Perodua Myvi will be a critical game-changer for Proton due to the large domestic volume of B-segment cars.

Maintain Outperform. We maintain our Outperform call on DRB-Hicom with an unchanged target price of RM3.53 based on sum-of-parts valuation. We like DRB-Hicom for: (i) its undervalued assets embedded within the group such as its 70%-stake in Bank Muamalat, its 32.2%-stake in Pos Malaysia as well as properties holdings (e.g. landbank in Glenmarie, Shah Alam, Proton City, Pegoh, Rebak Island, Iskandar Malaysia and The Verge, a shopping mall in Singapore); and (ii) upside potential for its automotive division from successful collaboration of Proton with global auto players and contribution from Deftech‟s AV8 contract in 2014.

Source: PublicInvest Research - 12 Dec 2013