Monday, September 26, 2011

CIMB Research upgrades Proton to Neutral

KUALA LUMPUR: CIMB Equities Research has upgraded PROTON HOLDINGS BHD [] from Underperform to Neutral and also raised the target price from RM3.10 to RM3.50.

It said on Monday, Sept 26 Proton appears to be in serious talks with Mitsubishi, going by the detailed collaboration plans revealed during last Friday, Sept 23 briefing.

'This is a positive surprise as it suggests that the two former partners could reach a formal agreement soon, including a potential contract manufacturing deal that could push Proton's utilisation from 50% to 90%,' it said.

CIMB Research said it also learnt that Lotus's performance is on track with the management's business plan and that Proton is making progress with its plans to penetrate India.

In the short-to medium-term, the main swing factor for Proton's earnings is Lotus's turnaround plan. However, Proton's battered share price largely reflects the risks.

'We halve our discount to its historical P/BV to 10%, which increases our target from RM3.10 to RM3.50. Valuations are cheap and the talks with MMC should provide some excitement. We upgrade Proton from Underperform to Neutral,' it said.

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