DRB-Hicom (DRB) announced that it has entered into a Master Collaboration Agreement (MCA) with Zhejiang Geely Holdings Group Co Ltd (Geely) regarding development of the Automotive HiTech Valley (AHTV) project. This follows the Head of Agreement (HOA) signed earlier this year at the Malaysia-China Business Forum in Beijing. The purpose of the MCA is mainly to formalise the governance framework and mutual understanding between the parties in the development of the AHTV. We are positive over this development as the MCA provides a formalized engagement platform for parties to collaborate and propel AHTV to become an international automotive hub for new energy vehicles (NEV). Pending further development from this MCA, we keep our estimates unchanged. We continue to like DRB’s growth prospect and retain our Outperform call with unchanged sum-of-parts (SOP) based TP of RM2.10.

• Geely is a global mobility technology group headquartered in the city of Hangzhou. It owns and manages a number of brands including Geely Auto, Lynk & Co, ZEEKR, Geometry, Volvo Cars and Polestar. Geely is DRB’s strategic partner, holding a 49.9% stake in Proton.

• AHTV is aimed at being the next generation international vehicle hub, covering extensive automotive and mobility solutions across the value chain, from being a technology research and development centre, to manufacturing cluster as well as supporting services and associated ecosystem including logistics, research university, training and learning institutions within a smart city. The AHTV is expected to attract some RM32bn worth of investments over the next 10 years and expand the capability of local vendors towards specializing in high technology manufacturing.

• The MCA will set the underlying principles, governance framework and mutual commitment to the AHTV project, including specific roles to be undertaken by parties for its development and promotional initiatives. DRB and Geely will work together to (i) promote the cooperation of NEV, (ii) plan the construction of the auto-components industrial park, (iii) promote the development of the new automotive industrial city and (iv) any other initiatives relating to AHTV, including but not limited to higher education and talent training, culture tourism, intellection property cooperation, maritime or other positioning solutions and service implementation and application.

Source: PublicInvest Research - 12 Oct 2023