30-08-2007: Proton to report sharply lower losses in FY08
PROTON Holdings Bhd, which reported a net loss of RM47 million for the first quarter (1Q) ended June 30, 2007, is expected to report sharply lower losses in FY08, says Aseambankers Equity Research.
The research house said yesterday Proton’s 1Q net losses were largely in line with consensus forecasts, although losses were moderated by cost savings.
However, it was more positive for FY08 due to slightly better sales led by new model Persona launched on Aug 15 as well as proactive export initiatives (completely knocked down (CKD) agreement to supply China’s Jinhua Youngman Automobile).
“To date, we understand that over 8,000 units of Persona have been booked, a respectable figure which equals the success of Perodua’s Viva (the Viva also garnered bookings of 8,000 units during its launch).
“Nevertheless, we do not expect Proton’s market share to improve significantly from 29% presently, due to stiff competition and potential cannibalisation of older models (Waja, Iswara),” Aseambankers Research said.
The research house said the shares may have bottomed out, but unlikely to be re-rated in the near term without the crucial catalysts of a strategic tie-up or reversal of steep losses.
It added Proton was unlikely to rope in a strategic partner until after the general election, referring to recent media reports that the government again extended the deadline for a strategic tie-up with Volkswagen (VW) to year-end.
Proton was removed as a Kuala Lumpur Syariah Index constituent stock in May 2007, which blocks share price support from syariah-compliant funds (including government-related funds) should the share price ease.
Aseambankers Research maintained its RM5.80 target price based on a 35% discount to FY08 net tangible asset per share.
Meanwhile, CIMB Research said Proton’s 1QFY3/08 annualised net loss of RM186.8 million was better than its full-year loss estimate of RM356.2 million and consensus loss estimate of RM239.7 million.
This was partly due to an insurance claim receivable and duties overprovided, and a better-than-expected operating margin, it said.
CIMB Research said 1Q revenue fell 19.5% on-year as sales volume dropped 15.6%, dragged down by low trade-in values and more stringent credit screening. Proton’s newer models like the Gen.2 and Savvy failed to draw buyers and have been heading downhill over the past six months.
Although core net loss fell only marginally on-year, it was reduced by 11% on a quarterly basis. This, we believe, resulted from Proton’s continuous cost-down efforts,” it added.
However, in light of the better-than-expected sales of the Persona, it had nudged its FY08-10 sales volume assumptions 2% to 3% higher, leading to 6% and 12% cuts in its net loss projections.
“We continue to believe that Proton will not be able to fend for itself without a foreign partner. Talks with VW have been dragged on for far too long and we believe that even if they pan out, the terms are unlikely to favour Proton,” it said.
The research house retained its “underperform” recommendation and RM4.52 target price, which was pegged to an unchanged CY07 NTA of 0.5 times.
Potential derating catalysts include the slow pace of negotiations and a possible unfavourable conclusion to the talk, it added.
The research house said yesterday Proton’s 1Q net losses were largely in line with consensus forecasts, although losses were moderated by cost savings.
However, it was more positive for FY08 due to slightly better sales led by new model Persona launched on Aug 15 as well as proactive export initiatives (completely knocked down (CKD) agreement to supply China’s Jinhua Youngman Automobile).
“To date, we understand that over 8,000 units of Persona have been booked, a respectable figure which equals the success of Perodua’s Viva (the Viva also garnered bookings of 8,000 units during its launch).
“Nevertheless, we do not expect Proton’s market share to improve significantly from 29% presently, due to stiff competition and potential cannibalisation of older models (Waja, Iswara),” Aseambankers Research said.
The research house said the shares may have bottomed out, but unlikely to be re-rated in the near term without the crucial catalysts of a strategic tie-up or reversal of steep losses.
It added Proton was unlikely to rope in a strategic partner until after the general election, referring to recent media reports that the government again extended the deadline for a strategic tie-up with Volkswagen (VW) to year-end.
Proton was removed as a Kuala Lumpur Syariah Index constituent stock in May 2007, which blocks share price support from syariah-compliant funds (including government-related funds) should the share price ease.
Aseambankers Research maintained its RM5.80 target price based on a 35% discount to FY08 net tangible asset per share.
Meanwhile, CIMB Research said Proton’s 1QFY3/08 annualised net loss of RM186.8 million was better than its full-year loss estimate of RM356.2 million and consensus loss estimate of RM239.7 million.
This was partly due to an insurance claim receivable and duties overprovided, and a better-than-expected operating margin, it said.
CIMB Research said 1Q revenue fell 19.5% on-year as sales volume dropped 15.6%, dragged down by low trade-in values and more stringent credit screening. Proton’s newer models like the Gen.2 and Savvy failed to draw buyers and have been heading downhill over the past six months.
Although core net loss fell only marginally on-year, it was reduced by 11% on a quarterly basis. This, we believe, resulted from Proton’s continuous cost-down efforts,” it added.
However, in light of the better-than-expected sales of the Persona, it had nudged its FY08-10 sales volume assumptions 2% to 3% higher, leading to 6% and 12% cuts in its net loss projections.
“We continue to believe that Proton will not be able to fend for itself without a foreign partner. Talks with VW have been dragged on for far too long and we believe that even if they pan out, the terms are unlikely to favour Proton,” it said.
The research house retained its “underperform” recommendation and RM4.52 target price, which was pegged to an unchanged CY07 NTA of 0.5 times.
Potential derating catalysts include the slow pace of negotiations and a possible unfavourable conclusion to the talk, it added.
Labels: Proton
posted by SEE FU at 8:50 AM
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