DRB’s earnings for the quarter were masked by an exceptional gain of MYR97.4m. Maintain BUY with a lower TP of MYR2.90 (52.6% upside). Recurring earnings were below expectations as its core automotive division fell back into the red likely due to flaccid Proton sales. Its other divisions have yet to generate consistent earnings traction. DRB remains attractive from an RNAV perspective.
Core automotive earnings below expectations. DRB-Hicom’s (DRB)2QFY15 (Mar) earnings were below expectations. Net profit for the quarter fell 13.7% QoQ and 32.5% YoY to MYR93.1m, despite an exceptional gain of MYR97.4m arising from the disposal of Uni.Asia General Insurance. Cumulative 1HFY15 earnings of MYR200.9m reached 52.7% of our previous earnings estimate. The main reasons for the deviation were an operating loss of MYR8.5m (vs 1QFY15 operating profit of MYR75.9m) at its automotive division and lower services earnings following the sale of the insurance business. No dividend was declared for the quarter.
Proton sales volume slumps. The loss incurred at the automotive division was consistent with the 2.3% YoY slump in Proton vehicle sales, which have been punished by the competitive market place, tighter financing conditions and rising living costs crimping the disposable incomes of the target market of Proton car buyers. This was offset by higher associate income from Honda Malaysia as Honda sales surged 67.4% YoY during the period. Management also reported additional progress billings from the AV8 contract. Concession earnings were steady while property earnings were lifted by contributions from Glenmarie Gardens Phase 2. Financing costs continued to be a burden,with EBIT interest coverage at only 1.5x.
Investment case. We lower our FY15-16 earnings estimates by 34.2% and 17.6% respectively to reflect the slower-than-expected rollout of the Proton Iriz as management is intent on ensuring that quality issues are properly resolved before production is ramped up. Our BUY call is centred on the deep discunt to our conservative estimate of its RNAV. We trim DRB’s SOP-derived TP to MYR2.90 (from MYR3.20).
Source: RHB
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Created by kiasutrader | Jun 14, 2016
Created by kiasutrader | May 05, 2016
stockdistrict
what is the point of copy and paste? As far as im concern we can get it in this website....
2014-11-28 09:55