KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) said DRB-Hicom Holdings Bhd is on track for a record year.
It said on Monday, Feb 28 that DRB-Hicom reported 3QFY11 net profit of RM110m (-17% qoq, +6% yoy), taking 9MFY11 net profit to RM400m (+88% yoy).
'This is in line with our RM539m forecast for the full year. While 3QFY11 automotive revenue fell 24% qoq to RM800m, EBIT was 14% higher at RM59m with margins expanding to 6% from 4% a quarter ago,' it said.
HDBSVR said this was likely due to better scale and overall lower costs for assembly and manufacturing.
Meanwhile, the 9MFY11 automotive division EBIT surged six-fold to RM133m. And services division EBIT - largely driven by its bank and concession businesses ' inched up 3% to RM282m (63% of group EBIT). DRB declared 2 sen gross interim DPS.
'Next catalysts. These are: (i) conversion of LOI for Deftech worth a potential RM8bn with lucrative margins, and (ii) privatization of Alam Flora in other states in Malaysia, which had received approval from Parliament a few years ago,' it said.
HDBSVR said it believed the conversion of LOI to LOA is forthcoming given the recent agreement between Deftech and FNSS Turkey to purchase 257 units of armoured carrier frames coupled with the intellectual property rights.
The research house said this will also allow it to export to the Asia-Pacific region. We have not factored these into its SOP value or EPS.
'In the medium term, the eventual divestment of 30% of Bank Muamalat (RM600m at 1.4x BV) and revival of property launches will boost FCF and may pave the way for a more formal dividend policy.
'High conviction BUY, TP RM3.55. The stock still offers unbeatable value at 6.4x FY12F PE and 0.7x P/NTA. Our target price, based on 20% discount to SOP, offers 79% upside,' it said.
It said on Monday, Feb 28 that DRB-Hicom reported 3QFY11 net profit of RM110m (-17% qoq, +6% yoy), taking 9MFY11 net profit to RM400m (+88% yoy).
'This is in line with our RM539m forecast for the full year. While 3QFY11 automotive revenue fell 24% qoq to RM800m, EBIT was 14% higher at RM59m with margins expanding to 6% from 4% a quarter ago,' it said.
HDBSVR said this was likely due to better scale and overall lower costs for assembly and manufacturing.
Meanwhile, the 9MFY11 automotive division EBIT surged six-fold to RM133m. And services division EBIT - largely driven by its bank and concession businesses ' inched up 3% to RM282m (63% of group EBIT). DRB declared 2 sen gross interim DPS.
'Next catalysts. These are: (i) conversion of LOI for Deftech worth a potential RM8bn with lucrative margins, and (ii) privatization of Alam Flora in other states in Malaysia, which had received approval from Parliament a few years ago,' it said.
HDBSVR said it believed the conversion of LOI to LOA is forthcoming given the recent agreement between Deftech and FNSS Turkey to purchase 257 units of armoured carrier frames coupled with the intellectual property rights.
The research house said this will also allow it to export to the Asia-Pacific region. We have not factored these into its SOP value or EPS.
'In the medium term, the eventual divestment of 30% of Bank Muamalat (RM600m at 1.4x BV) and revival of property launches will boost FCF and may pave the way for a more formal dividend policy.
'High conviction BUY, TP RM3.55. The stock still offers unbeatable value at 6.4x FY12F PE and 0.7x P/NTA. Our target price, based on 20% discount to SOP, offers 79% upside,' it said.
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