Proton shares up 13% or 90 sen on talk of VW deal

Proton Holdings Bhd's share price soared 13.14% or 90 sen to close at RM7.75 on Jan 26 on speculation that the government had brokered a deal with German carmaker Volkswagen AG (VW) to take up a 51% stake in Proton’s manufacturing arm.

The counter traded between RM6.70 and RM7.80, its highest in 13 months, with a total of 2.32 million shares exchanging hands.

A news wire report said the government had completed a deal with VW, just a day after the Malaysian Automotive Association had announced Proton’s car sales dropped 30.4% in 2006 to 115,538 units from 166,188 units in 2005.
DRB Hicom Bhd, which has also made a bid to take up a stake in Proton, was one of the most actively traded counters. It closed 5.26% or 10 sen higher at RM2 with 24.93 million shares traded.
When contacted, officials from Khazanah Nasional Bhd, Proton and DRB-Hicom denied knowledge of the government completing the deal with any party.
It has been reported that VW, PSA Peugeot-Citroen, General Motors Corp, DRB-Hicom and the Naza Group have made proposals to the government to take up a stake in the ailing national carmaker.

Proton foreign tie-up in Feb?

Proton foreign tie-up in Feb?

ANALYSTS expect the partnership between Proton Holdings Bhd and a foreign car manufacturer to be sealed soon and that this would have a positive impact on Proton's bottom line in the longer term.

AmResearch executive director and head of research Gan Kim Khoon said: “We expect an announcement on the impending merger soon, possibly in February.”

Gan said the conclusion to the national car manufacturer's search for a partner had been long overdue and that talks with potential candidates should be at the advanced stage.

To date, three foreign automakers and two local companies have expressed interest in Proton.

They are US car giant General Motors (GM), Volkswagen, PSA Peugeot Citroen, DRB-Hicom Bhd and the Naza group.

Most analysts believe GM and Volkswagen are the two frontrunners in sealing the deal.

Gan said GM and Volkswagen have the upper hand because of their strong brand name as carmakers as well as international presence and aggressive expansion plans, especially in the fast growing Asian markets.

However, he said, “It's difficult to say which automaker will seal the deal with Proton.” He noted that both the foreign car manufacturers (GM and Volkswagen) had their strengths and weaknesses.

Gan said Proton could not afford to wait much longer for a partner, as the national car manufacturer had been under-performing and losing market share for some time.

“A partnership with a foreign automaker will definitely have a positive impact on Proton,” Gan said, pointing to the recent increase in Proton's share price – reflecting investors' confidence – on news that GM had expressed interest in the national car manufacturer.

Proton's share price jumped 10% this month to a 12-month high of RM7.05 after newspapers reported GM had shown interest in the company.

An AmResearch auto analyst agrees with Gan that the potential partner would likely be foreign.

He said PSA Peugeot Citroen as a foreign partner would likely be the underdog, as the company was not known for its aggressive mergers or acquisition, unlike GM.

The analyst said PSA Peugeot Citroen would likely to offer a deal that was “at arm's length” to Proton.

In October 2002, General Motors completed a US$1.17bil acquisition of factories and other assets from the insolvent Daewoo Motor of South Korea through a joint venture it controls.

The venture, GM Daewoo Auto & Technology, took over two of Daewoo Motor's assembly plants in South Korea, one in Vietnam and later a third plant in South Korea. Bloomberg recently reported that GM might offer RM10 per Proton share.

The analyst said it was clear GM was planning to make Malaysia the Asian platform to penetrate new markets in the region.

“This move by GM is very positive for Proton,” he said.

“We also feel local companies might not have the clout to bring Proton's performance to a globally competitive level faster than foreign contenders,” he said.

The analyst said it was well known that foreign automakers were eyeing Proton for its manufacturing facility in Tanjung Malim, Perak - Proton's prized possession.

“But how exactly will foreigners take equity in or management of the manufacturing facility is the million dollar question,” he said.

“Will the manufacturing facility be 'acquired' at the holding level or subsidiary level? Also, what identity will Proton have upon merger/acquisition or partnership? Will it still have a national identity or a foreign one?”

The analyst said Khazanah Nasional Bhd, Proton's 43% stakeholder, and the Government would decide the final outcome of Proton’s fate.

A CIMB Securities analyst said the best partner was not necessarily the one that offered the highest price.

“Proton needs to find a partner that meets its business objectives over the next 10 years.”

A foreign auto analyst said ultimately Proton had to look at the best value proposition that the potential partners brought to the company for its long-term survival.

“Besides agreeing on the equity, Proton has to critically assess the partner's strength in terms of technology transfer, physical infrastructure, worldwide network and global brand presence,” she stressed.

On whether Proton would find a suitable partner, the foreign analyst said: “Failure is not an option. Proton needs a partner soon. It cannot afford to continue on its own.”

The foreign analyst said she was also optimistic that a suitable partner would be found soon.

For the second quarter ended Sept 30, 2006, Proton's losses widened to RM250mil, compared with RM154mil in the corresponding quarter a year earlier.

PROTON : [Stock Watch] [News]
PROTON 5 : [Stock Watch] [News]
PROTON-C : [Stock Watch]

Naza to drive up Proton's exports if its bid succeeds

THE Naza Group will help Proton Holdings Bhd boost exports and launch new models if it wins a bid to take over the struggling national carmaker, its chief said.

The local auto group, led by Tan Sri SM Nasimuddin SM Amin, recently made its bid on the premise that Proton should continue to be controlled by Malaysian interests.


"I think a local (company) must lead and choose the foreign partner (for Proton)," he told Business Times in an interview. "Naza can work with everybody."


"When I saw that they were looking for a foreign partner, I said why don't we buy? We're going into the same direction," said the 52-year-old auto magnate.


Nasimuddin said he was ready to draw on his over 30 years of successful involvement in the auto business - from used cars to the current creation of new models - to be a fitting and effective stakeholder in Proton.


"(Proton) needs the entrepreneurial drive," he said, adding that Naza could help develop more snazzy Proton models from existing platforms used by the national carmaker.


Naza makes its own cars, assembles foreign and rebadged vehicles and exports some models.


It wants to buy all of the Government's shares, worth RM1.6 billion at the current price, and rope in a foreign partner to help.


Nasimuddin declined to say how much was offered for the Proton block, but said Naza is willing to pay "a bit of premium" over the current market price.


He is even prepared to delay the initial public offering, slated for this year for his group, if it succeeds in getting control of Proton.


Naza is competing with DRB- HICOM Bhd, a contract assembler of Mercedes Benz and importer of Chevrolet, and the Mofaz Group, which also imports cars.


The Government is in talks with Germany's Volkswagen, France's Peugeot and US firm General Motors for a partnership with Proton.


However, the Government has not indicated clearly if a Malaysian or foreign company will be preferred to control Proton.


Nasimuddin stressed that the group's core business would be its edge against rivals DRB-HICOM and Mofaz. DRB-HICOM is involved in banking, property and waste management, among others, while Mofaz is diversifying into consumer goods like energy drinks.


"Our business is only cars. 90 per cent is in the car business. For 30 over years we're in the same line," he said.


Naza also has its own assembly plant in Gurun, Kedah, and is expanding production facilities with another RM1 billion plant that is under construction in Bertam, Penang.


Naza assembles cars under agreements with South Korea's Kia Motors Corp and France's Peugeot and it also imports luxury cars under the Ferrari brand.


Nasimuddin, who first started selling cars in a showroom in Cheras three decades ago, now has a company that manufactures its own cars.


Naza has a tenth of Malaysia's RM50 billion car market, the biggest in South-East Asia.


The group now is on its way to selling its cars abroad in a big way. It is also building a plant in southern India.


Naza could help Proton make and sell cars in India. Proton's old models like the Iswara and Wira could be produced and sold in car hungry and populous India, Nasimuddin said.


Similarly, Indonesia is also another big and attractive market, he added.


Naza would also ensure that Proton improves the quality of its products as well as its after-sales services.


"We benchmark against the world's best," he said. "We are waiting for the Government's decision."

Proton, Peugeot complete feasibility studies

Proton Holdings Bhd and PSA Peugeot Citroen have concluded feasibility studies on the proposed partnership between the two companies.

“The parties are in the process of evaluating the findings of the feasibility studies,” Proton said in a statement on Jan 17.

The studies include cooperation in the areas of optimising Proton’s production capacity focussing on contract assembly, product collaboration, supply of engine and components, and sales and distribution collaborative and contract assembly products.

Peugeot, Volkswagen AG and General Motors Corporation are in talks with the government to acquire a strategic equity stake in Proton.

Meanwhile, Bloomberg reported GM chief executive officer Rick Wagoner as saying that GM and Proton were at an early stage of talks.

"There have been conversations, not extensive," Wagoner, head of the world's largest automaker, told reporters in Dearborn, Michigan, late on Jan 16.

"We can't throw away money, but for sure we have a lot of people scheming how we can grow in those growth markets."

GM is targeting 11 emerging markets, including Malaysia, China and India, as it seeks to offset falling US sales. A partnership with Proton may help GM boost sales in Southeast Asia's biggest car market.

SPY ----> Mitsubishi EVO Prototype X

15-01-2007: Alado, Chery and Proton to start assembly mid-2007

Alado Corporation Sdn Bhd, China’s Chery Automobile Co Ltd and Proton Holdings Bhd are expected to embark on their car assembly programme in Malaysia by mid-2007.

Alado group executive chairman Tan Sri Cam Soh Thiam Hong said on Jan 15 that the parties had a car assembly programme on the drawing board and they expected to finalise the details in the next two months.

The thrust of the programme was to assemble Chery’s MPV B14 and SUV T11 models at Proton’s Shah Alam plant for distribution, he said.

However, issues that had to be resolved were on localisation, parts and the jig, welding and training, he told reporters after the opening of Alado’s Ampang branch in Kuala Lumpur.

Last December, Proton said the feasibility study for the programme was extended for the second time till February this year.

Soh said Alado, which distributes Chery cars in Malaysia, was targeting to sell 2,000 units of various models in 2007, with the launch of the two models.

He added that Chery was keen to make Malaysia its Southeast Asia distribution hub, in line with its target to achieve 200,000 units of sale in the region by 2010.

“Chery’s idea for Malaysia is to make it an assembly hub for the right hand-drive market," he said.

However, Soh said more “government incentives” should be offered to speed up Chery’s plan to set up a hub in the country.

SPY ----> Aston Martin (RACING CAR)

Analysis of Automotive Market at Malaysia