Hot Stock DRB-Hicom rises after strong 2Q results

by **Cals** Fri 29 Nov 2013, 18:29

Hot Stock DRB-Hicom rises after strong 2Q results

Business & Markets 2013

Written by Ho Wah Foon of theedgemalaysia.com

Friday, 29 November 2013 12:08

KUALA LUMPUR (Nov 29): DRB-Hicom Bhd rose actively in morning trades, after its stronger second quarter results beat estimates of some analysts.

As a result, there are positive comments on the company and its outlook today.

Yesterday, DRB-Hicom reported a net profit of RM138.0 million for second quarter to September 2013 (2QFY14) after posting a 10.3% year-on-year rise and 71.1% quarter-on-quarter increase in profit.

At 11.25 am today, the stock rose 13 sen or 5.4% to RM2.56 after hitting a high of RM2.61 in earlier trades. Trades done on the eighth top gainer totalled some 5.6 million shares.

In a note this morning, Public Investment Bank Research said the profit of DRB-Hicom was “ahead of its expectations”.

Excluding gain/loss on disposal, fair value adjustments and forex gain/loss, the company’s 2QFY14 core pre-tax profit was RM200.3 million and 2QFY14 core net profit was RM110.6m, it noted.

Public IB said the better 2QFY14 results were due to better performance from its automotive and services
divisions. “We maintain our Outperform call on DRB-Hicom with an unchanged 12-month target price of RM3.53,” it said.

The research house highlighted that a key catalyst for re-rating DRB lies with its ability to unlock the value of various non-core assets within the group. It expects its Uni.Asia General to be sold off in the near-term.

“We believe the current price is not reflective of DRB?s long-term potential as well as the underlying value of valuable assets within the group such as its 70%-stake in Bank Muamalat, its 32.2%-stake in Pos Malaysia as well as sizeable properties holdings,” said Public IB.

While stating that DRB-Hicom’s results were in line, RHB Research Institute said “DRB remains attractive given the deep underlying value in the assets within the group”.

Though leaving earnings estimates unchanged, RHB Research is keeping its buy call on DRB-Hicom and raising its target price by 10 sen to RM3.40, after updating its valuation assumptions.