The collaboration agreement between Proton Holdings Bhd and Honda
Motor Co Ltd Japan announced on Monday came as a surprise with
many analysts saying the news was not expected that soon. However, research houses are positive that the agreement will be advantageous to the national carmaker given Honda’s superiority in hi-tech engines.
This tie-up, said RHB Research, could give Proton access to drivetrain and platform technology at a possibly lower cost given its absence of economies of scale.
“Honda is an acknowledged leader in hi-tech engines with numerous products spanning across many segments,” it said.
Noting that it is a positive direction for Proton, the research house, however, said the choice of the national carmaker’s partner was not anticipated and the timing, sooner than expected.
RHB Research added that the maiden collaborative product could be a Perdana replacement model.
It expects the tie-up possibly allowing Honda to utilise Proton’s under-utilised Tanjung Malim plant in Perak, as a means of mitigating its risks by spreading out production capacity over multiple locations.
Honda has an assembly plant in Pegoh, Malacca, and a major facility in Ayutthaya, Thailand.
RHB Research also said that Monday’s announcement would in the next few months be followed by other plans such as rationalising Proton’s sales and servicing network to eliminate overlaps between Edaran Otomobil Nasional and Proton Edar.
It reiterated its “outperform” call on DRBHICOM, Proton’s owner, at a fair value of RM3.60.
“We believe DRB-HICOM has multi-year growth potential with significant under-valued assets. However, some degree of patience from investors will be needed to implement the new
initiatives,” it said.
Meanwhile, AmResearch has reaffirmed its “buy” rating on DRB-HICOM at RM3.80 as its fair value.
“We were surprised that Honda came into the picture as it was heavily speculated that a Volkswagen (VW) tie-up was imminent,” said AmResearch.
AmResearch said based on its discussions with Proton's management, the tie-up will not involve any Honda equity participation as the focus will be to develop a 2.0-litre car via platform-sharing.
"There is further upside as we believe that there will be similar arrangements with its other partners to produce models in different segments," AmResearch said, adding that the tie-up is set to be finalised within six months.
It also does not rule out a tie-up with VW to produce B segment cars as this will help resolve the underutilisation of the plant in Tanjung Malim.
Hong Leong Investment Bank (HLIB) also said the tie-up news was positive as this will give DRB-HICOM the chance to develop as top regional player in the growing automotive components and parts segment.
HLIB noted that Honda selected Malaysia as a regional hub after Japan and the US for manufac-turing hybrid cars by 2014 to 2015, after investing RM350 million to double its Pegoh plant's capacity to 100,000 units a year.
On Bursa Malaysia yesterday, DRB-HICOM closed one sen lower at RM2.52 with 71.02 million shares traded.
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