PETALING JAYA: DRB-Hicom Bhd is slated to record better earnings this year, on the back of stronger sales volume from its subsidiary, Proton Holdings Bhd.
CGS-CIMB Research said Proton is projecting 30% sales volume growth in 2020, fuelled by new launches, growing export sales and expansion of its dealer and 3S and 4S service centre network to 150 outlets this year.
“We like the group’s strategy of expanding to Indonesia and Thailand markets due to their relatively lower motorisation rates within South-East Asia amidst stiff competition from the Japanese marques.
“We estimate Proton will make up between 32% and 34% of DRB-Hicom’s net profit in 2020 and 2021 respectively, ” it said in a report yesterday.
Additionally, the research house said the postage rates revision on Feb 1 will help boost the profitability of 53.5%-owned Pos Malaysia mail division, which has been affected by lower mail volume and higher operating cost.“While mail volume should continue to decline, we estimate Pos Malaysia will capture additional RM270mil to RM288mil annual revenue or 15% revenue contribution to the group in 2020 and 2021 from the recent postage rate hike. We believe this will help turn around Pos Malaysia’s profitability in 2020.”
DRB-Hicom returned to the black with a net profit of RM358.97mil for the nine months period ended Dec 31,2019, from a net loss of RM5mil in the previous corresponding period.
RHB Research said the company’s earnings were within expectations.
“Proton’s exceptional performance helped to offset weakness in Pos Malaysia’s results and lower (associate) Honda Malaysia contributions. Proton’s future earnings growth should be fuelled by export sales and further local market share gains.
“Pos Malaysia’s earnings turnaround should also help fill the gap post Alam Flora’s disposal and near completion of the Media City development.”
The research house said it had adjusted its 2020 and 2021 earnings upwards by 12% and 13% respectively, imputing Pos Malaysia’s latest earnings assumptions while lowering down Honda Malaysia’s contributions.
“Key downside risks to our target price and forecasts include new model launch delays and supply disruption due to Covid-19, especially for the X70 and X50. Regulatory risk include a revamp of the excise duty structure after Dec 31 2020 could lead to higher car prices.”
PublicInvest Research also said it anticipates a better year for the company in 2020, underpinned by better performance of its automotive sector and improved efficiencies from Pos Malaysia, given the new tariff hike.
“We are keeping our forecasts unchanged, but upgrade our call on DRB to ‘outperform, ’ as there is an upside of 26% from our unchanged sum-of-parts target price of RM2.80.
Note that DRB-Hicom will change its financial year end to Dec 31 (from March 31) moving forward.
No dividend was declared during the quarter, as the final dividend payment will be made upon finalisation of the audited financial statement in April 2020.”
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