Hot Stock DRB-Hicom up 6.4% on govt’s approval of RM1.5b grant to Proton

by **Cals** Tue 12 Apr 2016, 01:31

Hot Stock

[size=28]DRB-Hicom up 6.4% on govt’s approval of RM1.5b grant to Proton

By Supriya Surendran / theedgemarkets.com | April 11, 2016 : 3:12 PM MYT

KUALA LUMPUR (April 11): DRB-Hicom Bhd rose as much as 7 sen or 6.4% to RM1.16 this morning, following the government’s approval of a RM1.5 billion soft loan to subsidiary Proton Holdings Bhd to pay its vendors for components supplied.

AmInvestment Bank is maintaining its buy call on DRB-Hicom with a fair value of RM1.50, saying the news of the federal grant is positive, as it will ease Proton’s immediate-term cash flow problems.

“However, we question if it will be adequate to stem the losses amid falling Proton sales, particularly in the absence of a plan that involves the entry of an incentivised equity strategic partnership with a foreign brand that can utilise its excess capacity,” said AmInvestment in a note today.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed, who announced the loan approval on Friday, said it was subject to Proton initiating a restructuring process for the loss-making national car maker.

Proton was required to convince the government of its new business model, so that its business is progressive and competitive, he said.

Proton must also come up with a "turnaround plan" for the company and a strategic plan to widen its local and international markets, and the car maker is also required to sign up a new "leading foreign partner" that will assist the company in research and development to ensure it is progressive and competitive internationally, the minister said.

DRB-Hicom shares was up 5 sen or 4.6% to RM1.14 at midday break today, with 9.2 million shares traded.
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