Proton Perdana Test Drive 19

Parent company of Proton, DRB-Hicom, is looking to sell potentially all of its stake in the national automaker, as told to The Star by CIMB Equities Research. According to the report, CIMB Equities Research said that a successful disposal of Proton at a good price would act as a catalyst for the share price.

It was commenting on a news weekly report that DRB-Hicom Bhd is expecting as many as seven bids for Proton by the middle of this month and it may even sell as much as 100% of Proton to foreign buyers.

In a separate report, CIMB Equities Research named France’s Groupe PSA and Renault SA, Germany’s Volkswagen, America’s General Motors, Japan’s Suzuki and China’s Geely as potential partners or buyers for Proton following the potential sale from DRB-Hicom. The secretary of the special task force, Madani Sahari, said earlier that Proton could look into mimicking the Perodua-Daihatsu partnership model as it has proven to be a success.

CIMB Research also pointed out that the plan to sell a stake in the national car marker, Proton, to a foreign partner is not new. Prior to DRB’s acquisition of Proton in 2012, Volkswagen and Peugeot-Citroen were reportedly keen to acquire a stake.

Proton Perdana Test Drive 7

“We are positively surprised by DRB’s willingness to dispose of its entire stake in Proton. We believe that, this time around, there is a higher chance that the sale of Proton to a foreign partner may succeed given the recent reorganisation in Proton’s top level management and its need for further equity injection,” the report said.

“Proton posted a loss of RM1.4bil (or 72 sen a share) in its FY3/2016 results. This led DRB-Hicom to record a pretax loss of RM821.3mil. Excluding the loss, we estimate DRB-Hicom’s pretax profit was RM578.7mil. To recap, DRB-Hicom bought a 100% stake in Proton for approximately RM3bil in 2012.

“The disposal is expected to boost the future earnings of DRB-Hicom as it will no longer need to consolidate the losses of Proton, if it sells a 100% stake. The sale could also improve the group’s net gearing ratio of 0.51 times as at March 31, 2016 and boost future cash flows,” it said.