KUALA LUMPUR: CIMB Equities Research is maintaining its FY17-19 EPS and Hold rating on DRB-Hicom with a higher target price of RM1.02 compared with the previous price of 75 sen.

It said on Wednesday this was based on 0.3 times CY17 price-to-book value (P/BV), which is about one standard deviation below its historical mean of 0.5 time. 

“We switch from P/E to P/BV valuation in view of prolonged earnings delivery risk. The key downside risk to our Hold call is deteriorating earnings performance at Proton and upside risk is stronger contribution from its defence and aviation divisions,” it said.

CIMB Research said it attended the launch of the new Perdana model on Tuesday at Putrajaya International Conventional Centre, which was attended by Prime Minister, Datuk Seri Najib
Razak. 

This is a follow up to the Mitsubishi Eterna-based model launched in 1995 and its replacement model in Dec 2013, a rebadge of the Honda Accord.

The model was developed via a platform-sharing agreement with Honda Japan Ltd. This is the only D-segment (large-size) sedan from Proton, and is based on the previous generation Honda Accord. The model comes in 2.0L and 2.4L variants, priced at RM114,000 and RM139,000, respectively. 

“Based on our checks, the new Perdana prices are cheaper than the Honda Accord 2.0 VTi-L and 2.4 VTi-L variants (RM150,000 and RM172,000), as well as the Mazda 6 2.0L and 2.5L variants (RM159,000 and RM194,000).

“Proton revised down its 2016 sales volume target by about 20%, from 150,000 to 120,000 units. The new sales target represents 18% on-year increase. The target was lowered mainly to account for the delays in new model launches, which were initially planned to commence in 1QCY16. Proton’s sales volume dropped 27% on-year in the four months of 20164.

“We are neutral on the event but encouraged to learn the Perdana’s pre-launch orders of 900 units. Management is targeting sales of 3,000 units by the end of the year, which we think is achievable given the pre-launch order book. 

“However, we do not think this will significantly boost Proton’s earnings as the Perdana volume target only represents 3% of Proton’s total sales volume target.

“Apart from the new Perdana, Proton is planning to launch three other models in FY3/17, namely the Iriz-based Persona (1QFY17), Saga sedan (3QFY17) and a new multipurpose vehicle (MPV) model (4QFY17). The MPV model will be a maiden Proton- Suzuki joint model. Overall, we expect all the four new models to create excitement among domestic consumers and help boost Proton’s sales from FY17 onwards,” said CIMB Research.