Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD
Research House: MIDF
Proton Holdings Bhd
(May 21, RM4.54)
Maintain buy at RM4.74 with target price of RM5.80: The Proton Gen2 gets an update that includes cosmetic tweaks with additional equipment. The enhanced model will continue to be available in high-line and medium-line versions. The new Gen2 high-line's enhancements include new finishing for the front grille, alloy rims and outer door handles as well as black painted roof. On the inside, leather upholstery is standard with audio control on the steering wheel and a new door trim finishing.
Despite the enhancements, the high-line price remains unchanged at RM57,488 for the manual variant and RM60,488 for the auto. The best bit is for the mid-line version which is RM1,500 cheaper (retail price RM54,988) where it will get similar enhancements as the high-line except the leather seats, multi-function steering wheel and the bodykit. In addition, the Gen2 mid-line will now also be fitted with the Proton Campro PS engine in place of the Campro IAFM unit.
Proton expects to sell 300 units of the enhanced Gen2 per month, which is more than the average of 99 units per month sold from January to April this year, and 75% more than the monthly average in 2009. Overall, Proton is aiming to sell 165,157 vehicles in 2010, which is in line with our estimate that would be 12% higher year-on-year (y-o-y) with market share to improve to 30% from its current 28%.
The improving sales in 1QCY10 would be a great booster to its earnings and may offer a surprise on the upside come the result announcement anytime soon. Until then, we are maintaining our forecast and valuation.
The decision on its foreign partnership is still the main catalyst. We have heard various news flows and we expect this to continue, keeping interest on the stock strong for a foreseeable future. The most recent is the news of a contract manufacturing deal with VW, which was not a surprise at all. The Tanjung Malim plant has a designed capacity for one million cars per annum and currently it is churning out only 150,000 units of Proton cars a year.
The Waja replacement model could be due later this year alongside the facelifted Persona. The development of a turbo-charged engine for the Exora is completed and would be in service in late 2010/early 2011. The recent launch of Satria Neo R3 Lotus Racing Edition is a good marketing exercise to take advantage of its F1 lineage.
According to Proton, it may decide by the end of this year or early 2011 whether to sell or lease its main car manufacturing plant in Shah Alam once the assessment to relocate to Tanjung Malim is finalised. Proton expects to move its staff and some of its equipment to the new site within the next two to three years.
Ramping up sales for the export markets has become a major target for Proton in an attempt to achieve the economies of scale with Thailand and Indonesia providing the platform. The China venture is still at the infancy stage while its other established market, while showing signs of progress, have yet to impress.
We maintain buy with target price maintained at RM5.80 pegged at 10 times FY11 earnings or 0.5 times its estimated'' PBV (price-to-book value) for FY11. ' MIDF Research, May 21
This article appeared in The Edge Financial Daily, May 24, 2010.
Company Name: PROTON HOLDINGS BHD
Research House: MIDF
Proton Holdings Bhd
(May 21, RM4.54)
Maintain buy at RM4.74 with target price of RM5.80: The Proton Gen2 gets an update that includes cosmetic tweaks with additional equipment. The enhanced model will continue to be available in high-line and medium-line versions. The new Gen2 high-line's enhancements include new finishing for the front grille, alloy rims and outer door handles as well as black painted roof. On the inside, leather upholstery is standard with audio control on the steering wheel and a new door trim finishing.
Despite the enhancements, the high-line price remains unchanged at RM57,488 for the manual variant and RM60,488 for the auto. The best bit is for the mid-line version which is RM1,500 cheaper (retail price RM54,988) where it will get similar enhancements as the high-line except the leather seats, multi-function steering wheel and the bodykit. In addition, the Gen2 mid-line will now also be fitted with the Proton Campro PS engine in place of the Campro IAFM unit.
Proton expects to sell 300 units of the enhanced Gen2 per month, which is more than the average of 99 units per month sold from January to April this year, and 75% more than the monthly average in 2009. Overall, Proton is aiming to sell 165,157 vehicles in 2010, which is in line with our estimate that would be 12% higher year-on-year (y-o-y) with market share to improve to 30% from its current 28%.
The improving sales in 1QCY10 would be a great booster to its earnings and may offer a surprise on the upside come the result announcement anytime soon. Until then, we are maintaining our forecast and valuation.
The decision on its foreign partnership is still the main catalyst. We have heard various news flows and we expect this to continue, keeping interest on the stock strong for a foreseeable future. The most recent is the news of a contract manufacturing deal with VW, which was not a surprise at all. The Tanjung Malim plant has a designed capacity for one million cars per annum and currently it is churning out only 150,000 units of Proton cars a year.
The Waja replacement model could be due later this year alongside the facelifted Persona. The development of a turbo-charged engine for the Exora is completed and would be in service in late 2010/early 2011. The recent launch of Satria Neo R3 Lotus Racing Edition is a good marketing exercise to take advantage of its F1 lineage.
According to Proton, it may decide by the end of this year or early 2011 whether to sell or lease its main car manufacturing plant in Shah Alam once the assessment to relocate to Tanjung Malim is finalised. Proton expects to move its staff and some of its equipment to the new site within the next two to three years.
Ramping up sales for the export markets has become a major target for Proton in an attempt to achieve the economies of scale with Thailand and Indonesia providing the platform. The China venture is still at the infancy stage while its other established market, while showing signs of progress, have yet to impress.
We maintain buy with target price maintained at RM5.80 pegged at 10 times FY11 earnings or 0.5 times its estimated'' PBV (price-to-book value) for FY11. ' MIDF Research, May 21
This article appeared in The Edge Financial Daily, May 24, 2010.
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