Financing, viability of new national car a drag on DRB-Hicom?

PETALING JAYA: While DRB-Hicom Bhd's participation in the new national car development is viewed to be in line with its strategic automotive plan, analysts have concerns on the financing and viability of the project that may drag DRB-Hicom in the short term.
HLIB Research is neutral on the revelation of DRB-Hicom's 96.9%-owned Composites Technology Research Malaysia Sdn Bhd (CTRM) as one of the potential partners for Malaysia's new national semi-autonomous car project, despite details remaining sketchy.
"We have concerns on the project's financing and viability (at least in the short term), as DRB is still in the midst of its restructuring exercise for a turnaround after registering losses for the past three financial years (dragged by Proton), while Proton may need equity injection in the near term to finance its growth plan," the research house said in a report.
"The overall details of the new national car project remain sketchy and the mentioned timeline is relatively aggressive, in our view. Given the short timeline, the prototype of the new semi-autonomous car may be based on existing developed ideal/vision prototype. We have doubts on Malaysia's existing capability and capacity for the project. It was not mentioned if the project would rope-in foreign partners/supports," HLIB Research said.
Relating to the production of the car, it said the project is likely to utilise existing manufacturing facilities in Malaysia at the initial stage, should the new car is on track to roll out before 2020.
"Furthermore, the new model is mentioned to be semi-autonomous, indicating that our existing infrastructure will need to be developed (at a fast pace) to accommodate to the features of the car."
It maintained a "buy" call on DRB-Hicom with an unchanged target price of RM2.80, as it is positive on Geely's strong support and commitment towards Proton's turnaround.
"The new developments with Geely has further strengthened our view on its commitment in turning around Proton and establish Proton as its platform for regional Asean market expansion as well as penetration into China," HLIB Research said, adding that apart from the Boyue (to be launched next month), Proton is confirmed to introduce two new Geely models (SX11 and VF11) in 2019-2020.