KUALA LUMPUR: DRB-HICOM Bhd is on its way to become a regional player via Proton Holdings Bhd, according to RHB Research.
The firm said Proton was on track for the next phase of earnings growth, via increasing market share and tapping into regional markets.
DRB-HICOM Defence Technologies Sdn Bhd (Deftech) the company’s other subsidiary, is also well-positioned to win a new contract to supply military vehicles and would be the only local company with such a capability after the AV-8 contract ends, RHB Research said in report today, following its meeting with the DRB-HICOM management.
“Deftech’s contract of supplying the AV-8 armoured vehicle to the Ministry of Defence is expected to end by 2020, with outstanding orders amounting to RM1.5 billion.
“There is no official announcement on the extension of the project yet but, being the only local company with the capability and experience in supplying such vehicles, Deftech would have an advantage in securing the contract – if any are tendered out,” it added.
Deftech contributed 15 per cent to DRB-HICOM’s revenue in the year ended March 2019.
RHB Research said Proton had continued to do well, with sales of 8,685 units in September, which was 92 per cent higher
year-on-year but down 4.8 per cent month-on-month.
This took its second quarter sales to 26,402 units (+19.3 per cent YoY, +4.6 per cent QoQ).
The Proton Saga was well received, with 8,000 units delivered.
Proton has received 20,000 bookings on the model since its launch in August.
The launch of facelifted models namely the Persona, Iriz, Exora and Saga at lower prices has improved Proton’s business viability.
However, RHB Research said severe underutilisation of its plants in the past may have led to the models being sold at a loss.
“Proton’s X70 CKD model introduction will be pushed back to Dec 2019-January 2020. It may face margin pressure once it is locally assembled, as it will not enjoy the same level of operating leverage as the CBU model”
On its dealer network transformation initiative, the firm said Proton had approved 154 4S/3S centres (sales, service, spare parts, and body and paint service) for upgrades, surpassing its initial 2019 target of 150 outlets.