Thursday, December 15, 2011

HDBSVR: Khazanah's sale of Proton stake increasingly more likely

KUALA LUMPUR (Dec 15): Hwang DBS Vickers Research said Khazanah Nasional Bhd's sale of its 42.7% stake in PROTON HOLDINGS BHD [] looked increasingly more likely, in its view.

It said on Thursday that assuming Khazanah sells its 42.7% stake and not a partial interest, there might be a general offer on the cards unless exemption is given.
'We assume it would be a cash offer and not a share swap given Khazanah's intention is to pare down its stake in GLCs.

'We think DRB-Hicom has the financial strength as well as track record in the automotive industry to take up the exercise if a GO happens,' it said.

The research house said it could probably fund the acquisition via additional borrowings (on top of its RM1.8 billion Islamic MTN announced recently) and equity raisings at a later stage as its other divisions such as Deftech, Alam Flora and Volkswagen are also in need of funds to finance capex.

'Currently, Proton trades at its mean P/NTA of 0.5 times, from 0.3 times to 0.4 times before the merger speculation. Talks of a tie-up between Volkswagen and Proton in 2004-2007 pushed Proton's share price up to +2 SD above mean or 0.8 times NTA.

'At the same 0.8 times NTA multiple of our break-up value of RM7.57 per share as at end-Sept 2011 implies a value of RM6.10 a share,' it said.

HDBSVR said this was within the speculated price tag range of RM6.00-RM7.00 but below Khazanah's reported entry price of RM8 per share.

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