Public Invest maintains "Outperform" on DRB-Hicom, TP RM3.53

KUALA LUMPUR: Public Invest Research is maintaining its “Outperform” rating on DRB-Hicom Bhd with a target price of RM3.53 as it favours DRB for its cross-selling and the positive outlook on its automotive division.

We believe its current share price is attractive and not fully reflecting the underlying value of vast assets within the group,' it said.

It said DRB's property division is expected to increase its contribution to the group and see considerable operational and marketing synergies between Bank Muamalat and Pos Malaysia in its services sector.

“The extensive reach of Pos Malaysia, with more than 700 post offices and 300 pos mini will enable Bank Muamalat to grow its Islamic banking services to many parts of Malaysia, in particular the rural areas which are normally underserved,” it said.

However DRB risks turning around Proton but it expects the firm to partner with global players such as Honda or Volkswagen to revive Proton.

It added weaker economy and lower disposable income would also dampen car demand and the disposal of assets at a lower price would affect its valuation.

“Foreign shareholdings of DRB increased to 20.9% as at financial year 2013 from 15.2% in 2011. As such, any sell-down by foreign investors may weigh on its share price,” it said.

Public Invest said it projects DRB's financial year 2014 core earnings to RM370mil.

“As for its services segment, its loss of income from the disposal of Hicom Power, which contributed RM57.4mil in finaicial year 2012, will weigh down its earnings, but it will be partly offset by improved earnings from Bank Muamalat," it said.