DRB-Hicom’s 1Q core net profit within expectations

by **Cals** Tue 02 Sep 2014, 20:45

Business & Markets 2014

Written by AmResearch

Tuesday, 02 September 2014 11:27

DRB-Hicom Bhd
(Aug 29, RM2.21)
Maintain buy with target price of RM3.60: DRB-Hicom’s first quarter ended June 30 of financial year 2015 (1QFY15) core net profit of RM133 million came within expectations, making up 27% of consensus’ estimate. It beat our expectation, representing 33% of our forecast. As expected, no interim dividend was declared in the quarter.
At the operating level, earnings before interest and taxes (Ebit) at RM206 million were within our expectations, accounting for 23% of our forecast.
As anticipated, its auto division’s showing improved further due to contributions from the RM7.5 billion AV8 armoured vehicle contract from the Ministry of Defence. The division’s Ebit made up 38% of our estimate. The services and property sectors’ Ebit accounted for 18% and 12% of our full-year estimates respectively.
The auto division posted an estimated Ebit of RM92 million (+9% year-on-year [y-o-y]) versus a loss of RM44 million in the previous quarter. It was aided by recognition of revenue from defence jobs.
Defence and aviation jobs accounted for 14% of the auto division’s turnover in 1QFY15 versus only 2% in 1QFY14.
Revenue contributions from the seven-year AV8 contract are expected to peak in FY17 and FY18.
Proton (Proton Holdings Bhd is a wholly-owned subsidiary of DRB-Hicom) car sales growth in 1QFY15 was flat y-o-y with 30,306 units versus 30,439 units in 1QFY14, but down 7.4% compared with the previous quarter (4QFY14).
For FY14 ended March 31, Proton car sales fell 2.3% y-o-y to 137,144 units — representing approximately 23.7% of the country’s passenger vehicle market versus Perusahaan Otomobil Kedua Sdn Bhd’s 33.4% during the same period.
DRB-Hicom’s 34%-owned associate Honda Malaysia garnered additional share — from 8.9% in calendar year 2013 (CY13) to 12.5% (37,203 units) in the first half of CY14. Honda sales more than doubled to 21,576 units in 1QFY15 from 9,856 units a year earlier.
Notably, DRB-Hicom said Proton’s British sports car unit Lotus Group International Ltd’s turnaround was on track, with sales growing by 31% to 505 units in 1QFY15 from 386 units in 1QFY14. We maintain our FY15F and FY16F numbers and our “buy” call. — AmResearch, Aug 29

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This article first appeared in The Edge Financial Daily, on September 2, 2014.[/size]