February 28, 2011

PROTON - Proton falls to 14-months low on losses

Stock Name: PROTON
Company Name: PROTON HOLDINGS BHD
Research House: MAYBANK

Proton Holdings Bhd, Malaysia’s state-controlled car-maker, fell to a 14-month low after announcing an unexpected quarterly loss, prompting brokerages including Maybank Investment Bank Bhd to downgrade the stock and cut their earnings estimates.

Shares of the company, based in Subang Jaya, near Kuala Lumpur, dropped 5.9 per cent to RM3.85 at 11:19 a.m. in Kuala Lumpur trading, set for their lowest close since December 22, 2009. Proton was the biggest loser on the FTSE Bursa Malaysia Top 100 Index, which dropped 0.4 per cent today.

Proton had a net loss of RM60.1 million (US$19.7 million) in the third quarter ended December 31 compared with a profit of RM79.7 million a year earlier, the company said in a statement on February 25, citing higher branding costs and restructuring expenses incurred to revive its unprofitable overseas sports car unit, Lotus Group International Ltd.

“Lotus is leaving burn marks,” Wong Chew Hann, an analyst at Maybank said in a report today. “Revitalizing Lotus will exhaust mid-term positives and impede Proton’s financial performance over the next three years.”

Wong slashed his financial year 2011 earnings estimate for Proton by 32 per cent and downgraded the stock to “sell” from “buy.” He also reduced his share price estimate to RM3.40 from RM5.90, saying Proton’s net cash level was cut by half to RM573 million in the quarter ended December 30, compared with the previous three months. -- Bloomberg

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