CIMB Research ups Proton target price to RM6.05

Tags: CIMB | DRB-Hicom | higher target price | Proton

Written by Joseph Chin
Wednesday, 23 September 2009 10:48

KUALA LUMPUR: CIMB Equities Research is maintaining a trading buy on PROTON HOLDINGS BHD [] with a higher target price of RM6.05.

In a research note issued on Sept 23, it reiterated its trading buy call on the potential share price triggers of a better-than-expected sales performance; newsflow on a foreign alliance, and local companies' increasing interest in taking a stake in Proton.

The Edge weekly reported Tan Sri Syed Mokhtar Al-Bukhary, who is DRB-Hicom's major shareholder had submitted a bid to acquire a block of shares in Proton. However, this will not trigger a mandatory general offer, according to the report.

CIMB Research said it was generally neutral on the speculation of the sale stake to DRB-Hicom. However, the speculation could result in counter bids from other parties or more newsflow that may excite the market, both of which would be positive for Proton's share price.

"Our earnings projections are intact but our target price has been raised from RM5.25 to RM6.05, which we now peg to a 20% discount to the company's 10-year historical P/BV (price to book value) of 0.8 times (vs. five-year historical P/BV previously).

"In view of an improvement in the prospects of a strategic alliance with a foreign partner, we think that a 10-year historical average would be more reflective of its M&A valuations as it would take into consideration Proton's still sizeable market share and its relatively modern plant, R&D and export capabilities, the potential of which should be more fully realised through a strategic alliance," it said.