Proton shares pick up steam

PETALING JAYA: Proton Holdings Bhd's shares went into high gear again as the counter was fuelled by news Khazanah Nasional Bhd is divesting its 42.7% stake to DRB-HICOM Bhd and that China-based Shanghai Automotive Industry Corp (SAIC) is interested to acquire a stake in the national car company's sports car unit, Lotus.
At 5pm yesterday, the national carmaker gained 24 sen, or 6%, to close at RM4.23 with over 17 million shares traded.
Speaking to reporters on Saturday in Langkawi, Proton advisor and former Prime Minister Tun Dr Mahathir Mohamad revealed that Khazanah is selling its 42.7% stake in Proton to DRB-HICOM.
OSK Research and TA Securities both said DRB-HICOM had the ability to fund the proposed acquisition.
“DRB-HICOM's
net gearing, excluding bank related assets and liabilities, stands at
only 17%, as indicated by its last quarterly results and this can be
maximised easily to 50%-70% to acquire Proton and possibly even more,
given its onerous capital expenditure (capex) needs for Lotus and other
research and development activities and expansion plans lined up for
Proton,” said OSK Research.
The research house pointed out that
DRB-HICOM had recently announced that it is raising RM500mil from the
sukuk market to fund its working capital, as well as other potential
acquisitions and expansions.
“It has an option to maximise this sukuk issue to the tune of RM1.8bil,” said OSK.
TA Securities in its report said any stake sale would value Proton at RM6 to RM7 per share.
“Based
on this pricing, a deal would value Proton between RM3.3bil and
RM3.8bil. Although the RM6-RM7 per share is a huge premium to market
price, it is still below Khazanah's cost of investment in Proton, which
we believe is in the north of RM8 per share,” TA said.
However, Affin Investment Bank reckons that funding will be a “stumbling block” for DRB-HICOM.
“Funding
will remain a stumbling block as the acquisition will require an
estimated RM2.6bil, assuming 100% equity stake in Proton (as the 42.7%
Khazanah purchase will trigger a mandatory general offer) and a 20%
premium to its current closing price of RM3.99 per share.
Meanwhile, analysts generally agreed that the potential entry of SAIC to acquire a stake in Lotus would bode well for Proton.
“With
RM2.35bil in capex needed for Lotus (of which RM1.33bil has been tapped
from a syndicate of banks), the injection in capital by SAIC in
exchange for an equity ownership would be a relief for Proton,” said
OSK.
“This would ultimately allow Proton to preserve and allocate
capital accordingly in view of its own capex needs for the Proton model
expansion and potential joint-venture setups, following the recent
memorandum of understanding inked with China's Hawtai and Mitsubishi Motor Corp.”

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