DRB-HICOM (BUY ←→, EPS ←→)

HLIB Research
PP 9484/12/2012 (031413)
DRB-HICOM (BUY , EPS )
15 May 2014
Price Target: RM3.30 ()
Share price: RM2.47
INDUSTRY: OVERWEIGHT
COMPANY INSIGHTS
Expect Weak 4QFY14
Highlights/
Comments
 Proton sales remained weak in 4QFY14 (DRB’s financial
year ended March) with only 32,734 units (-3.7% yoy;
+6.6% qoq) as consumers were withholding purchases
in anticipation of favorable measures (i.e. lower car prices)
under NAP 2014 (mid-Jan 2014). Nevertheless, sales has
improved since March, as Proton intensifies marketing
activities. Proton is banking on its upcoming fuel-efficient
GSC model (by 2QFY15) to recapture market share.
 Audi sales also dropped significantly to only 328 units in
4QFY14 from the cessation of full tax exemption for CBU
hybrid model effective 1st Jan 2014 under NAP 2014.
 Honda sales remained strong in 4QFY14 with 15,627
units (+30.1% yoy; +4.4% qoq), benefiting from NAP 2014,
as Honda Jazz Hybrid is the only CKD hybrid model
enjoying full tax exemption. Furthermore, the newly
launched City model (on 20th March) is garnering strong
demand with 10k bookings within first month.
FYE03/14
Revenue:
Proton Sales
Audi Sales
HAM Productions
Associates/JVs:
Honda Sales
Mitsubishi Sales
Isuzu Sales
Suzuki Sales
MAA
1Q14
2Q14
3Q14
4Q14
30,439
808
3,949
43,260
807
4,079
30,711
1,016
3,949
32,734
328
4,512
9,856
2,971
2,654
1,080
14,713
2,884
3,185
1,311
14,962
2,970
3,870
1,215
15,627
3,747
2,447
1,550
 For 2014, we concur with DRB’s view on the tough and
competitive automotive market environment, as OEMs
fight for market share at the expense of margin through
attractive packages (discounts and offerings), while
consumers are facing high living costs and tightening
credits (from banks).
 Nevertheless, we believe DRB is relatively undervalued
given its valuable assets (concessions; bank; and
properties) and the potential of automotive division
(turnaround of Proton and Lotus; expansion of Honda and
VW; and growth of Deftech).
Risks




Forecasts
 Unchanged.
Rating
Valuation
Page 1 of 3
Prolonged bank tightening measures on lending rules.
Slowdown of Malaysia economy affecting car sales.
Global automotive supply chain disruption.
Slow integration of Proton and Pos.
BUY 
 Positives – 1) Restructuring of Proton & Lotus; 2) Regional
hub for VW Car and Honda Hybrid Car; 3) Deftech awards
of RM7.55bn over 7 years; 4) Synergy of POS and KLB with
DRB’s other business units; and 5) Severely undervalued
counter (as divestment of non-core assets taking place).
 Negatives – 1) Competitive automotive market; 2) Bank
tightening financing measures; and 2) Weakening of MYR.
Daniel Wong
[email protected]
(603) 2168 1077
KLCI
Expected share price return
Expected dividend return
Expected total return
1879
33.6%
1.8%
35.4%
Share price
(RM)
(KLCI)
3.0
1900
1850
2.8
1800
2.6
1750
2.4
1700
DRB (LHS)
2.2
May-13
KLCI (RHS)
1650
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
Information
Bloomberg Ticker
Bursa Code
Issued Shares (m)
Market cap (RM m)
3-mth avg. volume (‘000)
Price Performance
Absolute
Relative
Major shareholders
Etika Srategy
EPF
Skagen
Summary Earnings
FYE Mar (RM m) 2013A
Turnover
13,135
EBITDA
1,427
Pre-tax Profit
1,037
Rpt. net profit
575
Norm. net profit
312
Norm. EPS (sen)
16.1
P/E (x)
16.1
Book Value (RM)
3.7
P/B (x)
0.7
Net Dvd Yield (%)
2.1
Net Gearing (%)
45.0
ROE (%)
4.6
ROA (%)
0.8
HLIB
DRB MK
1619
1,933
4,775
1,645
1M
4.7
2.6
3M
1.5
-2.7
12M
11.7
-1.0
55.9%
9.3%
4.6%
Table
2014E 2015E 2016E
14,446 16,610 18,598
1,369 1,602 1,821
495
794 1,011
296
508
663
296
508
663
15.3
26.3
34.3
17.0
9.9
7.6
3.8
4.0
4.3
0.7
0.7
0.6
1.7
2.3
2.9
55.0
57.3
56.2
4.1
6.8
8.3
0.7
1.1
1.4
 Maintained Buy on DRB with unchanged Target Price of
RM3.30 based on 20% discounts to SOP.
15 May 2014
HLIB Research | DRB-HICOM
www.hlebroking.com
Financial Projections
Income statement
FYE 31 Mar (RMm)
Revenue
Operating cost
EBITDA
Depreciation
EBIT
Interest income
Interest expense
JVs & Associates
Exceptionals
Pretax profit
Taxation (Inc Def Tax)
Minorities
Net profit
Core Profit (Ex Def Tax)
No of shares (m)
Rep. EPS (sen)
Core EPS (sen)
Cashflow
2012A
6,878
-6,221
657
-217
440
52
-153
168
1,334
1,821
-148
-382
1,292
-25
1,933
66.8
-1.3
2013A
13,135
-11,708
1,427
-771
656
95
-338
163
377
1,037
-338
-124
575
312
1,933
29.8
16.1
2014E
14,446
-13,078
1,369
-765
604
88
-359
163
0
495
-59
-139
296
296
1,933
15.3
15.3
2015E
16,610
-15,008
1,602
-798
804
72
-364
282
0
794
-143
-143
508
508
1,933
26.3
26.3
2016E
18,598
-16,777
1,821
-826
995
64
-366
318
0
1,011
-182
-166
663
663
1,933
34.3
34.3
Balance sheet
FYE 31 Mar (RMm)
Fixed assets
Other long-term assets
Other short-term assets
Working capital
Receivables
Payables
Inventory
Net cash
Cash
ST debt
LT debt
Shareholders' funds
Share capital
Reserves
Minorities
Other liabilities
Page 2 of 3
2012A
657
-101
992
-91
-1,325
132
-2,615
-2,484
-2,070
2,888
0
-115
-263
-2,044
0
7,737
5,693
2013A
1,427
-242
-2,087
-195
1,582
484
-1,085
-601
177
1,154
0
-77
-309
346
-3
5,693
6,035
2014E
1,369
-272
-1,382
-59
0
-344
-1,000
-1,344
-206
110
0
-117
0
-1,556
0
6,035
4,479
2015E
1,602
-292
-77
-143
0
1,090
-1,000
90
-334
51
0
-146
0
-339
0
4,479
4,140
2016E
1,821
-302
126
-182
0
1,463
-1,000
463
-350
48
0
-175
0
-14
0
4,140
4,126
2012A
66.8
-1.3
-203.7
4.5
1.7
3.4
0.8
-128.5
NA
5,026
-2,327
7,354
11.2
-0.4
2013A
29.8
16.1
16.1
5.5
2.1
3.7
0.7
-31.1
NA
5,026
-3,193
8,219
5.8
4.6
2014E
15.3
15.3
17.0
4.5
1.7
3.8
0.7
-69.5
NA
5,026
-4,023
9,049
6.6
4.1
2015E
26.3
26.3
9.9
6.0
2.3
4.0
0.7
4.7
1.8
5,026
-4,414
9,440
5.9
6.8
2016E
34.3
34.3
7.6
7.5
2.9
4.3
0.6
24.0
9.2
5,026
-4,619
9,646
5.3
8.3
Valuation ratios
2012A
4,973
18,883
3,300
4,041
3,195
-673
1,519
-2,327
3,040
-1,892
-3,476
6,556
1,720
4,836
1,216
21,099
2013A
4,984
19,914
3,512
5,581
4,306
-715
1,990
-3,193
3,284
-2,809
-3,668
7,101
1,720
5,381
1,254
22,443
2014E
5,230
21,874
2,792
6,211
4,736
-787
2,262
-4,023
2,564
-2,809
-3,778
7,310
1,720
5,590
1,363
23,412
2015E
5,432
23,458
2,452
7,213
5,445
-867
2,635
-4,414
2,224
-2,809
-3,829
7,702
1,720
5,982
1,476
24,964
2016E
5,606
25,197
2,295
8,133
6,097
-954
2,991
-4,619
2,067
-2,809
-3,877
8,220
1,720
6,500
1,612
26,780
2012A
2013A
2014E
2015E
2016E
4,059
260
2,559
4,059
260
2,559
10,136
407
2,591
11,520
314
2,612
13,418
312
2,880
139
-15
318
23
139
-15
318
23
246
38
351
18
186
25
403
-10
335
25
455
-10
125
15
28
125
15
28
106
8
49
110
8
45
220
8
54
Assumption Metrics
FYE 31 Mar (RMm)
Revenue
Automotive
Property & Infra
Services
EBIT
Automotive
Property & Infra
Services
Holdings
JVs & Associates
Automotive
Property & Infra
Services
FYE 31 Mar (RMm)
EBITDA
Net interest received
Working cap changes
Taxation
Others
Operating cashflow
Capex & acquisitions
Free cashflow
Other inv cashflow
Net borrowings
Share issuance
Dividends paid
Other fin cashflow
Net cashflow
Forex translation
Beginning cashflow
Ending cashflow
FYE 31 Mar (RMm)
Reported basic EPS (sen)
Core basic EPS (sen)
Core FD EPS (sen)
PER (x)
FD PER (x)
Net DPS (sen)
Net DY (%)
BV/ share (RM)
PB (x)
FCF/ share (sen)
FCF yield (%)
Market capitalization
Net cash
Enterprise value
EV/ EBITDA (x)
ROE (%)
Quarterly financial summary
FYE 31 Mar (RMm)
Growth (%)
Sales Growth
EBITDA Growth
EBIT Growth
PBT Growth
Net Profit Growth
Margins (%)
EBITDA Margin
EBIT Margin
PBT Margin
Net Profit Margin
Net Debt/Equity (%)
2012A
2013A
2014E
2015E
2016E
1.1
10.0
1.3
-18.7
-106.2
91.0
117.2
48.9
13.6
-1363.2
10.0
-4.1
-7.9
-14.1
-5.0
15.0
17.0
33.2
60.6
71.6
12.0
13.7
23.7
27.3
30.5
9.5
6.4
7.4
-0.4
35.5
10.9
5.0
4.4
2.4
45.0
9.5
4.2
3.4
2.0
55.0
9.6
4.8
4.8
3.1
57.3
9.8
5.4
5.4
3.6
56.2
15 May 2014
HLIB Research | DRB-HICOM
www.hlebroking.com
Disclaimer
The information contained in this report is based on data obtained from sources
believed to be reliable. However, the data and/or sources have not been independently
verified and as such, no representation, express or implied, is made as to the accuracy,
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positions or be materially interested in any securities mentioned herein or any securities
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Such addresses or hyperlinks (including addresses or hyperlinks to Hong Leong
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Hong Leong Investment Bank Berhad website shall be at your own risk.
1. As of 15 May 2014, Hong Leong Investment Bank Berhad has proprietary interest in
the following securities covered in this report:
(a) -.
Published & Printed by
Hong Leong Investment Bank Berhad
(10209-W)
Level 23, Menara HLA
No. 3, Jalan Kia Peng
50450 Kuala Lumpur
Tel 603 2168 1168 / 603 2710 1168
Fax 603 2161 3880
2. As of 15 May 2014, the analyst, Daniel Wong, who prepared this report, has interest
in the following securities covered in this report:
(a) -.
Equity rating definitions
BUY
TRADING BUY
HOLD
TRADING SELL
SELL
NOT RATED
Positive recommendation of stock under coverage. Expected absolute return of more than +10% over 12-months, with low risk of sustained downside.
Positive recommendation of stock not under coverage. Expected absolute return of more than +10% over 6-months. Situational or arbitrage trading opportunity.
Neutral recommendation of stock under coverage. Expected absolute return between -10% and +10% over 12-months, with low risk of sustained downside.
Negative recommendation of stock not under coverage. Expected absolute return of less than -10% over 6-months. Situational or arbitrage trading opportunity.
Negative recommendation of stock under coverage. High risk of negative absolute return of more than -10% over 12-months.
No research coverage, and report is intended purely for informational purposes.
Industry rating definitions
OVERWEIGHT
NEUTRAL
UNDERWEIGHT
Page 3 of 3
The sector, based on weighted market capitalization, is expected to have absolute return of more than +5% over 12-months.
The sector, based on weighted market capitalization, is expected to have absolute return between –5% and +5% over 12-months.
The sector, based on weighted market capitalization, is expected to have absolute return of less than –5% over 12-months.
15 May 2014

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