Monday, September 19, 2011

CIMB Research maintains Underperform on Proton

KUALA LUMPUR: CIMB Equities Research is maintaining its Underperform recommendation on PROTON HOLDINGS BHD [] and retains its earnings projections and target price of RM3.25, which is based on a 20% discount to its historical price-to-book value of 0.5 times.

CIMB Research said on Monday, Sept 19 that Proton is reportedly in serious discussions with Mitsubishi Motors Corporation (MMC) on a strategic collaboration to strengthen both players' global competitiveness.

'A tie-up between the two would be a win-win proposition as MMC would be able to use Proton's Tanjung Malim plant to assemble cars for Malaysia and the Asean market while Proton would be able to make use of its spare capacity.

'The partnership should also help lower both players' overall product development costs,' it said.

CIMB Research said it thinks that MMC will replace Nissan as the partner for Proton's global small car, Emas.

However, it said that it is too early to turn positive on Proton given the earnings risks posed by Lotus's turnaround plan.

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