Monday, August 29, 2011

CIMB Research downgrades Proton to Underperform

KUALA LUMPUR: CIMB Equities Research has downgraded PROTON HOLDINGS BHD [] to an Underperform and reduced its target price from RM3.65 to RM3.25.

'Proton's 1QFY3/12 results were a huge disappointment as core net profit accounted for only 3% of our and consensus full-year forecast,' the research house said on Monday, Aug 29.

CIMB Research said Group Lotus was to blame as higher expenses were incurred under its five-year turnaround plan. No dividends were declared for the quarter, as expected.

'We are slashing our FY12-14 earnings by 35%-60% to reflect higher losses from Lotus. We are also widening the discount we tag to Proton's historical P/NTA of 0.5 times from 10% to 20% to reflect the heightened risk that Lotus's turnaround exercise poses to Proton's earnings.

'This pushes down our target price from RM3.65 to RM3.25. We downgrade Proton from Neutral to Underperform as this result could trigger a de-rating. Other catalysts are 1) weaker domestic earnings, and 2) liberalisation of the auto sector,' it said.

The research house said it liked Tan Chong, which it had an Outperform, for auto exposure.

No comments:

Post a Comment