Proton advances on chairman bid, but strategic partner crucial

KUALA LUMPUR (Jan 5): Securities of PROTON HOLDINGS BHD [] rose on
Thursday, spurred by the latest corporate development where its chairman
Datuk Mohd Nadzmi Mohd Salleh confirmed he had put in a bid for
Khazanah Nasional's 42.7% stake.

However, CIMB Research said a
strategic partnership with a global original equipment manufacturer
(OEM) involving TECHNOLOGY [] transfer was needed for Proton's exports
aspirations and its long-term sustainability as an auto manufacturer.

At 2.31pm, Proton was up 13 sen to RM15.01 while its call warrants also
advanced in heavy trade. Proton-CL rose seven sen to 22 sen, Proton-CG
five sen to 49.5 sen and Proton-CH 4.5 sen to 45 sen.

The FBM
KLCI rose 2.88 points to 1,507.10. Turnover was 771.48 million shares
done valued at RM599.23 million. There were 308 gainers, 311 losers and
339 counters unchanged.

A news report quoted Nadzmi as saying
that privatisation was the way to go for Proton, which would enable him
to restructure the whole group to turn it around.

"I know the
business well, and Proton is close to my heart. There is a potential in
Proton and that is why I dare to make a bid and the offer runs into
billions," he was quoted saying in the report.

Nadzmi had also
said if "done right", Proton's profit could easily be doubled or tripled
without incurring any additional investment cost.

"It is all
about how you juggle your assets. This could be done by increasing the
utilisation rate of Proton's assets, cost reduction and also increasing
Proton's exports. These steps could easily add a further RM500 million
to RM600 million to Proton's bottom line," he was quoted saying.

CIMB Research said news of a potential management buyout is not
entirely a surprise as Proton's management has, in the past, indicated
such intention to do so.

'Datuk Nadzmi's belief in the
privatisation for Proton and his indication that his bid runs into
billions should be good news for minority shareholders banking on
Proton's general offer,' it said.

The research house said'' his
comment on an offer for the NTA price of Proton being too high
reaffirmed its belief that a balance has to be struck as Khazanah would
unlikely to settle for a price much lower than Proton's NTA but an entry
price that is too high would give the acquirer less ammunition in its
overhaul of the company.

'While we concur that one way to revive
Proton's profitability would be to increase its plants' utilisation
rate needed for the business to achieve economies of scale, we think a
strategic partnership with a global OEM involving technology transfer is
needed for Proton's exports aspirations and its long-term
sustainability as an auto manufacturer,' it said.