DRB-Hicom may be Proton's best suitor: OSK

DRB-Hicom Bhd may just be the best bidder for Khazanah's 42.7 per cent stake in Proton Holdings, said OSK Research.

In
a research note today, OSK said DRB-Hicom may just be the best suitor
out there despite bids by Proton chairman Datuk Nadzmi Mohd Salleh and
Tan Sri Arumugam Apavoo Packiri and Gerald Lopez of Genii Capital, a
private equity firm with a stake in the Lotus Renault GP Formula One
Team.

"We opine that the attempts from Nadzmi and other joint bidders do not represent enough value to ensure Proton's turnaround.

"We
still reiterate that DRB is currently Proton's best suitor given its
tie-up with Volkswagen, which intends to set up a large Asean production
hub in Malaysia," it added.

The research house said funding will
not be an issues for DRB-Hicom as the group's net gearing ex-bank
related assets and liabilities stand at only 17 per cent, as indicated
by its last quarterly results.

"This can be easily stretched to
50-70 per cent to acquire Proton and possibly even higher, given
Proton's onerous capital expenditure needs and its planned research and
development activities and expansion," said OSK.

OSK said
DRB-Hicom recently announced that it is raising RM500 million from the
sukuk market for working capital and other potential acquisitions and
expansion.

"It has an option to maximise this sukuk issue to the tune of RM1.8 billion," it added.

Meanwhile,
it was reported in The Edge weekly that Arumugam and Lopez are mulling a
joint bid for Khazanah's stake, reportedly for RM6 a share.

"We
don't see any value proposition in turning around Proton on the table
should these joint bidders acquire Proton, pointing out none of these
two joint bidders have a stake or whatsoever relevant experience in the
automotive sector," said OSK.

The research house maintains a
"buy" call on Proton's shares at an unchanged fair value of RM5.87
premised on a 10 per cent premium to its adjusted Net Tangible Asset per
share of RM5.34.

"This includes a revaluation surplus of RM147.6
million on the group's land bank and after stripping off all
intangibles and inventories, as well as the estimated equity value of
loss-making Lotus," it added. -- Bernama