CIMB says no quick fix for Proton, will continue to drag on DRB

by **Cals** Tue 03 Jun 2014, 00:00

Business & Markets 2014

Written by Jonathan Gan of theedgemalaysia.com

Monday, 02 June 2014 13:36

KUALA LUMPUR (June 2): CIMB Research says there is no quick fix for Proton and that the national car maker’s sales performance will continue to be a drag on DRB-Hicom’s bottomline.

In a note today, analyst Lucius Chong of CIMB Research recommended investors switched to Tan Chong instead, CIMB’s top pick for the auto sector.

“Switch to Tan Chong for our top pick. We believe there is no quick fix for Proton, which will continue to be a drag on DRB’s bottom line. We anticipate it will take years for Proton to return to profitability,” said Chong”

Chong said that he believed Dr Mahathir’s influence and connections would help the national carmaker but maintained that the problem with the company was structural.

“We believe the problems with Proton are structural problems that go way beyond the top level management issues.

“As the automotive industry is basically a volume game, Proton is in desperate need to come up with a line of new models with competitive quality and pricing to enable it to regain its domestic market share and penetrate the expert markets profitably,” said Chong.

He said that the best way forward for the company is to “to collaborate with a credible foreign partner to develop its new models.”

Chong reiterates his “hold” rating on DRB-Hicom with an unchanged target price of RM2.56.