Malaysia's DRB-Hicom poised to see better earnings prospect with Proton-Geely joint venture

Source: Xinhua| 2017-08-28 12:37:00|Editor: Zhou Xin
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KUALA LUMPUR, Aug. 28 (Xinhua) -- DRB-Hicom, the parent company of Malaysian automaker Proton, will see better earnings outlook following the completion of the joint venture between Proton and China's Zhejiang Geely, analysts said on Monday.

DRB-Hicom announced its first quarter result last Friday that the group's net losses in the April to June quarter widened 0.2 percent year-on-year to 169.7 million ringgit (39.8 million U.S. dollars). The group, however, saw its revenue for the period improve 33.43 percent year-on-year to 3.34 billion ringgit.

Losses of the group's automotive sector reduced to 171.3 million ringgit, from 209.2 million ringgit. Its revenue also rose 19.3 percent year-on-year to 2.1 billion in the period, boosted by better sales during the Aidilfitri festive period.

PublicInvest Research said in a report Monday that it expects DRB-Hicom's automotive division to continue to see improved performances anchored by lower losses recognized from Proton upon completion of the disposal of a 49.9 percent stake to Geely.

It is noted that an extraordinary general meeting will be held on Aug. 30 to seek DRB-Hicom shareholders' approval on the proposed disposal. The disposal is expected to be completed by the fourth quarter of 2018.

Kenanga Research also said in a report that it expected the group's losses to be narrowed in subsequent quarters upon completion of the divestment of its loss-making Lotus and Proton stakes to Geely, and also the anticipated better car sales on the back of improving consumer sentiment.

It is noted that a new manufacturing plant in Tanjung Malim will be ready in five years' time, but the first Proton car made with Geely's technology will roll out by the end of next year or in 2019.