STOCK FOCUS OF THE DAY
DRB-Hicom : To produce Lotus cars in China
BUY
We reiterate BUY on DRB-Hicom, with an unchanged fair value
of RM2.88/share based on a 20% discount to our SOP value of RM3.59/share.
DRB-Hicom on Friday announced an equal JV with China’s Goldstar Heavy
Industrial Co Ltd to produce Lotus cars in Fujian province, China, with an
investment of up to RMB10bil (RM5.84bil) under an initial business plan for
2015 to 2030. The JV terms are to be in effect for 30 years.
DRB-Hicom’s subsidiaries Proton and Lotus Group
International, and Goldstar will hold 40%, 10% and 50% of the registered
capital of the JV company, Goldstar LOTUS Automobile Co Ltd, with initial
investment and registered capital of RMB2.7bil (RM1.58bil) and RMB900mil
(RM525.7mil), respectively.
The JV will also produce and sell Lotus engines, parts
and components and accessories, as well as provide after-sales services. The
initial stage will see the R&D on the production of the vehicles, and
within a 24-month period after the business licence is obtained, the JV will
proceed with the production its business plan. DRB-Hicom said the venture would
be funded via internal funds and external borrowings.
Things appear to be turning around for Lotus. Eight months
into the year ended 31 March, 2015 (FY15), Lotus had sold 1,448 cars, up 55%
YoY – reportedly Lotus’ best sales performance since 2008. Lotus expects total
sales of 2,000 units for FY15. It has been reported that the Lotus Group’s
losses had narrowed by more than half to £71.1mil in FY14 from losses of
£168mil in FY13, with sales rising 1% to 1,301 units. Lotus Engineering however
saw revenue declining by 43% to just £13mil.
We believe this latest development is positive for Lotus and
DRB-Hicom given China’s huge market for luxury and premium auto brands. China
is the world’s largest car market. Maintain BUY.
Others :
British American Tobacco : 50sen/pack price hike fully
reversed HOLD
Econ Watch : Patchy economic data for the US economy
QUICK TAKES
Tenaga Nasional : Higher solar power tariff is earnings
neutral BUY
Plantation Sector : Newsflow for week 13 to 17
April NEUTRAL
NEWS HIGHLIGHTS
Teo Seng Capital : Malaysia’s egg consumption to grow at 3%
to 5%
Malaysia Marine and Heavy Engineering Holding : Looks abroad
Astro Malaysia Holdings : Launches personalized music
streaming service Raku
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