KUALA LUMPUR: CIMB Equities Research is positive on the latest development in Proton with the appointment of Dr Li Chunrong as the new CEO for Perusahaan Otomobil Nasional Sdn Bhd (PONSB) as the market awaits details of the transformation plan.
It said on Monday that in 10 weeks, he intends to unveil a transformative plan for Proton encompassing eight strategies to improve the group’s operation, with a core focus on customer satisfaction.
“We understand that he is focusing on improving quality and Proton’s sales network,” it said.
The research house said for example, Geely is planning to supply Proton with an engine that meets the Euro 6 emission standard, hybrid engines and pure electric engines. These new engines will allow Proton to penetrate other markets across Asean.
“Finally, Proton is also on track to launch its first mid-sized SUV, which will be based on Geely’s Boyue, by the end of 2018,” it said.
DRB-Hicom had secured China’s Zhejiang Geely Holdings (Geely) as Proton’s foreign strategic partner (FSP) following Geely’s subscription of 547 million shares in Proton Holdings Bhd (Proton), which makes up a 49.9% stake, for a total subscription price of RM460.3mil.
The group is targeting to gradually reduce losses at Proton and break even in three to four years.
“We think the target is achievable as we anticipate more new Proton-Geely cross-platform models in the future. This will expedite new model introduction and help Proton to save in terms of product development cost.
“In addition, Proton is expected to benefit from Geely’s latest technology as the latter intends to supply the latest engine and energy solutions to Proton,” it said.
CIMB Research maintained its Add call on the stock and sum-of-parts based target price of RM2.35.
Narrowing losses at Proton and higher-than-expected profit contribution from the services division are potential re-rating catalysts.
Meanwhile, key downside risks to its call are widening losses at Proton and weaker contribution from the services division.
CIMB Research noted that Proton will be led by board members who are automotive experts.
Datuk Seri Syed Faisal Albar remained Proton’s chairman. He is joined by two senior executives from DRB-Hicom, Shaharul Farez Hassan and Amalanathan Thomas, as its nominees. Meanwhile, Geely has nominated two representatives, Daniel Donghui Li (CFO of Geely) and Feng Qing Feng (CTO of Geely Auto).
All five nominees also sit on the board for Perusahaan Otomobil Nasional Sdn Bhd, the production, operations, manufacturing and marketing division at Proton. They are joined by Dr Nathan Yu Ning (VP of Geely’s international operation) and Dr Winfried Vahland, former chairman and CEO of Volkswagen unit Skoda.
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