KDN: PP 10744/06/2012 12 March 2012 | Company Visit Proton Holdings Bhd Maintain NEUTRAL P3-21A…testing the limit Unchanged Target Price (TP): RM5.50 INVESTMENT HIGHLIGHTS P3-21A test drive. Proton arranged the P3-21A test drive for a group of 19 analysts on last Friday. It was held at Proton’s test track located within its manufacturing plant in Shah Alam. There were RETURN STATS three variant models being tested, i.e. high-line (turbocharged), mid- line (Continuously Variable Transmission ~ CVT), and manual. The Price (9 Mar12) RM5.41 test drive session was followed by a short presentation on P3-21A from the Head of Product Planning. Target Price RM5.50 P3-21A C-segment model. P3-21A is a sedan C-segment model designed for style and comfort, with primary target buyers among Expected Share Price +1.7% families and young professional executives. This model, which slots Return in between Proton Persona and Proton Inspira, is based on the Proton Tuah concept model (See Figure 1). A preview of P3-21A Expected Dividend Yield - was also aired on TV3’s Bulletin Utama during the weekend. (See Figure 2). Amongst the features that were highlighted are as below: Expected Total Return +1.7% No Details Remarks 1 Engine High-line (turbocharged) 1.6L Charged Fuel Efficiency (CFE) with 7 Speed STOCK INFO Pro-Tronic Mid-line (CVT) 1.6L Intake Air-Fuel Module (IAFM) with 6 speed KLCI 1,579.0 Manual 1.6L IAFM with 5 Speed The vehicle performance will be able to generate Bursa / Bloomberg 5304/ PROH MK the amount of power similar to 2.0L vehicle produces. Board / Sector Main/ Automotive 2 Chassis Introduce new technology Hot Press Forming (HPF) which consist 12 HPF Syariah Compliant Yes parts and strategically placed at crucial point. 3 Interior Leg room (Front: 930mm; Rear: 815mm) Issued shares (mil) 549.2 Boot Space: 508L Keyless Push Start (ON/OFF) 4 Others Par Value (RM) 1.00 Smart Info Display (SID) Paddle Shifter Water Repellent Fabric Market cap. (RM’m) 2,971.2 Anti-Trap Power Window Auto Fold Door Mirror Price over NA 0.5X Auto Rain Sensor Auto Lamp Sensor 52-wk price Range RM2.55-RM5.53 YES 4G – High speed internet access Sport Rim 16 Beta (against KLCI) 0.6 5 Colors Fire Red Tranquillity Black 3-mth Avg Daily Vol 4.6M Genetic Silver Solid White 3-mth Avg Daily Value RM24.9m Elegant Brown Blue Lagoon Major Shareholders Who would be the likely competitors? P3-21A is likely to compete Khazanah 42.7% with the rest of C-segment models in the market such as Honda Petronas 7.9% City, Toyota Vios, Kia Forte, and so forth. For instance, if we gauge EPF 7.5% the price range of Honda City and Toyota Vios which hover around RM70K – RM95K, we expect the P3-21A model price would likely to DRB-Hicom 7.3% fall within this range with a discount of c. 5%-10%. KINDLY REFER TO THE LAST PAGE OF THIS PUBLICATION FOR IMPORTANT DISCLOSURES MIDF EQUITY BEAT Monday, 12 March 2012 Proton delays P3-21A launch. As reported in the media, P3-21A launch date was delayed due to issues related to components, design, readiness and cost that need to be finalised. In addition, the delay was also partly due to Proton trying to find the right date for all the key stakeholders, especially the Prime Minister Datuk Seri Najib Razak, Proton adviser Tun Dr Mahathir Mohamad and other major stakeholders, to be able to be present. We gathered from Proton that the launch date is tentatively by end-March or April. Meanwhile, according to media the initial launch date for the P3-21A was to be on 17 Mar’12. The POWER OF 1: Z Proton will be organizing its largest outdoor five-day event i.e. POWER OF 1 that will be held on 14 – 18 Mar’12. Z The event is to commemorate its technology advancements, engineering achievements, sales and promotions, innovation and its progress and development over the last 27 years. Z The hype of the event will be the open bookings of new P3-21A starting on 14 Mar’12 onwards with expectations to secure about 1,000 bookings during the event. Source: Paultan Reiterate NEUTRAL although the upcoming P3-21A is a positive development for Proton. Note that the transfer of Khazanah’s 42.7% stake to DRB-Hicom is scheduled for completion by March followed by a mandatory general offer (MGO) for the remaining shares owned by minorities. We do not expect the share price to appreciate above the offer price of RM5.50 in the near term, but downside will also be limited. Hence, we reiterate our NEUTRAL recommendation. Our target price is at RM5.50 based on 0.8x FY12f NTA of RM6.89 on the back of proposed MGO. INVESTMENT STATISTICS FYE MAR FY10 FY11 FY12F FY13F Revenue (RM'm) 8,226.9 8,969.9 9,174.5 9,495.3 EBIT (RM'm) 254.2 205.2 116.7 194.5 Pretax profit (RM'm) 260.9 214.4 98.4 179.6 Net profit (RM'm) 218.9 155.6 75.6 132.3 EPS (sen) 39.9 28.3 13.8 24.1 EPS growth (%) -172.5 -28.9 -51.4 75.2 PER(x) 13.6 19.1 39.3 22.5 Net Dividend (sen) 20.0 10.0 0.0 0.0 Net Dividend Yield (%) 0.3 0.5 0.0 0.0 Source: Company, Forecasts by MIDFR 2 MIDF EQUITY BEAT Monday, 12 March 2012 Figure 1: P3-21A Model Source: Paultan.org,Arenakereta.com Figure 2: P3-21A teaser on TV3’s Buletin Utama Source: Various DAILY PRICE CHART Syed Muhammed Kifni Amelia Arshad [email protected] 03-2173 8391 3 MIDF EQUITY BEAT Monday, 12 March 2012 MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X). (Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad) DISCLOSURES AND DISCLAIMER This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD. The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS BUY Total return is expected to be >15% over the next 12 months. Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been TRADING BUY assigned due to positive newsflow. NEUTRAL Total return is expected to be between -15% and +15% over the next 12 months. SELL Total return is expected to be <15% over the next 12 months. Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been TRADING SELL assigned due to negative newsflow. SECTOR RECOMMENDATIONS POSITIVE The sector is expected to outperform the overall market over the next 12 months. NEUTRAL The sector is to perform in line with the overall market over the next 12 months. NEGATIVE The sector is expected to underperform the overall market over the next 12 months. 4.