KUALA LUMPUR : DRB-Hicom Bhd
’s disposal of its 90% equity interest in Corwin Holding Pte Ltd for SGD285.3mil (RM870mil) will help to unlock the value of non-core assets within the group, according to PublicInvest Research.
In a note today, the firm said that if successful, the disposal will increase its target price for DRB-Hicom’s stock by 3% to RM1.60. The disposal is expected to be completed by the first quarter of next year (1Q16).
It is maintaining its ‘outperform’ call on the stock with an unchanged target price of RM1.55.
DRB-Hicom via its subsidiary company Hicom Megah Sdn Bhd holds an effective 90% stake in Corwin, which owns a leasehold property in Singapore called The Verge.
The property is an eight-level shopping mall located on Serangoon Road, which is located in the bustling Little India district in downtown Singapore.
In a filing to Bursa Malaysia yesterday, the company announced the proposed sale of its equity interest in Corwin to Singapore's Evolutyon Real Estate Investment Holding Pte. Ltd.
DRB-Hicom estimated that the gain arising from the proposed disposal will amount to RM427.47mil, said PublicInvest
“The Verge has a total net lettable area of approximately 130,250 square feet. We view the disposal of The Verge at the price of RM870.1mil is reasonable, although the disposal price is above what we have ascribed in the valuation at RM780mil in our sum-of-parts valuation of DRB-Hicom, due to the stronger Singapore dollar,” it said.
According to PublicInvest, the disposal is positive given the challenging economy as it will improve DRB-Hicom’s cash flows and strengthen its balance sheet.
Going forward, the research firm said that the main concern for the company is in the performance of Proton.
“Nonethelessm we still believe in its embedded value and the potential of its other automotive operations, stable concession businesses, and substantial properties and landbank,” it said.
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