DRB-Hicom’s 3Q to be driven by Proton sales

The group records a revenue of RM4.7b in 1H20 as car sales were lifted by the tax holiday


DRB-HICOM Bhd is expected to post better financial results in the third quarter ended Sept 30, 2020 (3Q20), compared to the preceding quarter driven by higher automotive sales of Proton Holdings Bhd.

Hong Leong Investment Bank Bhd analyst Daniel Wong said it remains to be seen whether the company will be profitable in 3Q20, given the banking and aviation segments are affected despite a boost in automotive.

“We expect an improvement in 3Q20 compared to 2Q20 as a result of higher car sales for the group. However, we also expect a deterioration in the banking and aviation segments,” Wong told The Malaysian Reserve (TMR) yesterday.

DRB-Hicom is in the banking business through Bank Muamalat Malaysia Bhd, while it is involved in aviation via an aerospace manufacturing company, Composites Technology Research Malaysia Sdn Bhd, as well as a logistics business anchored by Pos Aviation Sdn Bhd, or formerly known as KL Airport Services Sdn Bhd.

On a year-on-year (YoY) basis, Wong said DRB-Hicom’s financial results in 2019 were on a higher base, but this year, the results will be impacted by the Covid-19 pandemic.

DRB-Hicom recorded a revenue of RM4.74 billion in the first half ended June 30, 2020 (1H20), led by its automotive sector as car sales were lifted by the tax holiday.

For the six months, the group posted a net loss of RM479.36 million, according to a previous exchange filing.

In 2Q20, revenue amounted to RM2 billion, while net loss stood at RM306.08 million.

In that period, full economic activities only started to resume in mid-May upon the gradual reopening of the economy as announced by the government.

Kenanga Investment Bank Bhd analyst Wan Mustaqim Wan Ab Aziz said DRB-Hicom’s financial results in 3Q20 will improve quarter-on-quarter mainly driven by the Proton X70 sales, but the YoY performance would be weaker from the economic impact of the Covid-19 outbreak.

“Proton is the highest growth contributor at this point. Bank Muamalat is affected by the loan repayment moratorium and other impairment losses,” Wan Mustaqim told TMR, adding that its aviation business would have suffered as well.

The 3Q is post-Movement Control Order when car sales were improving compared to 2Q.

Proton recently reported its fourth consecutive month of growth following the sale of 11,935 vehicles in September, up 33.6% YoY and 4.9% month-on-month.

The X70 continued to dominate the overall SUV market and posted its second-best sales month of 2020 with 2,849 units sold.

Proton’s other brands — the Persona and Exora — also remained the best-selling models in their class with both models now expected to end the year as cumulative sales leaders.

The company sold some 13,216 units in July, and 11,378 vehicles in August, with an estimated market share of 21.6% for August and 21.7% year-to-date.

Wan Mustaqim said the best quarter for DRB-Hicom is likely the 4Q, driven by one of higher automotive sales with the launch of the new Proton SUV, the X50, and Honda City soon.

“There will be an improvement in 3Q20, but the best quarter expectedly would be the 4Q because of improvement in banking and new launches of the X50 and Honda City.

“Its YoY is going to be weaker due to the moratorium and the phase-out of the outgoing Honda City. There could also be some discounting on the X70 as more sales are expected to go to the X50,” he said.