27-11-2007: All Asian markets down, Proton extends losses

All Asian markets fell at midday on Nov 27, with Hong Kong’s Hang Seng Index the top loser while at Bursa Malaysia, Proton extended its losses as investors continued to sell their shares after the government ended talks with Volkswagen last week.

At 12.30pm, the KLCI was down 7.01 points to 1,357.36, the FBM Emas fell 50.66 points to 9,161.83 and the Second Board Index lost 49.78 points to 6,797.8. The KLCI futures fell 16 points to 1,367.5.

Turnover shrank to 356 million shares valued at RM474 million. There were 136 gainers, 572 losers while 192 counters were unchanged.

Among Asian markets, the Hang Seng Index fell 2.18% or 603 points to 27,023.1, dragged by losses in Bank of China shares after a key shareholder sold a US$567 million (RM1.9 billion) stake.

Singapore’s Straits Times Index fell 1.77% to 3,358.16, Shanghai’s A Share Index 1.51% lower at 5,126.93, South Korea’s Kospi fell 0.83% at 1,839.87 and Japan’s Nikkei 225 0.45% down at 15,067.77.

Light crude oil was trading at US$97.03 per barrel. Crude palm oil futures fell RM16 to RM3,011 per tonne.

The ringgit was quoted at 3.366 to the US dollar.

At Bursa, the KLCI fell at the start of trade as investors’ sentiment was dampened by the overnight losses on Wall Street and worries about the sub-prime mortgage crisis.

However, news that the Abu Dhabi Investment Authority had reached a deal to buy an equity stake in US banking giant Citigroup for US$7.5 billion could help offset worries about credit-related losses in major banks.

Among the heavyweights, Maybank was flat at RM11.50, Telekom added 10 sen to RM10.70 while Tenaga fell five sen to RM8.95.

27-11-2007: Govt may re-look at local partners for Proton

KUALA LUMPUR: The government may still consider the possibility of a local automotive player as a strategic partner in Proton Holdings Bhd following the termination of talks with Volkswagen AG (VW) and General Motors, said Deputy Prime Minister Datuk Seri Najib Razak.

“We will decide later. We have to talk to the Proton management (on this),” he said in response to a question whether local players like DRB-Hicom Bhd and Naza Group still figured as possible partners in Proton.

Speaking to reporters after launching Scomi Group Bhd’s next generation monorail Sutra (Scomi Urban Transit Rail Application) here yesterday, Najib said although Proton’s management had its plans, it had not formally submitted a business turnaround plan to him.

Najib heads the Cabinet Committee on National Automotive Policy, which ultimately made the decision to withdraw from the negotiations with VW following a final reappraisal of whether the time was right to enter a strategic alliance with a major car manufacturer.

Last Tuesday, Second Finance Minister Tan Sri Nor Mohamed Yakcop announced that the government had decided to withdraw from talks with VW and GM to sell a strategic stake in the national car project.

Proton’s share price plunged to a seven-year low the following day to RM4.02. The stock continued its slide yesterday, falling 22 sen to close at RM3.82 with 4.92 million shares traded.

Subsequently, quoting a Finance Ministry official, who declined to be identified, The Edge Financial Daily had reported that the government would not be talking to local automotive players which had expressed interest in acquiring a stake in Proton.

Meanwhile, on the sidelines of the Scomi monorail launch, Naza Group chief executive officer Tan Sri Nasimuddin SM Amin told reporters that Naza was still keen on partnering Proton.

“Proton is a good company and we are willing to share with it our technical, research and development, and marketing experience,” he said.

On whether the withdrawal of negotiations with the foreign carmakers stemmed from Proton’s recommendation, Najib told The Edge Financial Daily: “No, it was not Proton. Just take what the Prime Minister (Datuk Seri Abdullah Ahmad Badawi) had earlier said as the factors for the withdrawal.”

Last week, following the termination of talks with VW, Abdullah had said Proton was doing well and had started turning around.

“(The) Proton management has already demonstrated the ability to turn around. The situation that Proton is in today is not the same like two, three years ago,” he had said.

Abdullah had said the government had asked Proton to have a turnaround plan, in the same way Malaysia Airlines achieved a turnaround.

Earlier yesterday, Sharon Tan reported Najib as saying that the market should give the national carmaker a chance to turn around its performance given the recent positive development in the company.

Asked if the company’s continued sliding share prices was due to market over-reaction, Najib said: “Obviously the market was expecting the announcement of strategic partner and it didn’t happen.”

“There was a negative reaction by the market but the government is mindful of the fact this is our national car company.

“We have to balance between business interest as well as the desire of the people to see the national car remain in our hands,” Najib told reporters after witnessing the delivery by Eurocopter Malaysia of three helicopters to the Malaysian Maritime Enforcement Agency in Petaling Jaya yesterday.

Najib said Proton could not survive depending solely on the domestic market, and “we have to go within Asean and slightly beyond the region.”

23-11-2007: Proton should focus on Asia, says Rafidah

KUALA LUMPUR: Proton Holdings Bhd should concentrate on building its market base in Asia instead of competing in the United States or Europe, Minister of International Trade and Industry Datuk Seri Rafidah Aziz said.

Proton would be able to compete more effectively in markets such as China, India and Southeast Asia by taking advantage of the low tax regime under the Asean Free Trade Agreement, she said.

“We should not forget that Proton is not going to be a global company. I say this because the American and European markets are different and not for us,” Rafidah said.

She was speaking to reporters after opening the Second Asia Oceania Tax Consultants’ Association International Convention 2007 here yesterday.

However, the national carmaker could make further inroads into the Chinese market through closer cooperation with car exporters in China, she said.

Rafidah also said her ministry would continue to help Proton to develop an efficient vendor system and find new markets in Asia.

On Proton’s failed bid to get Volkswagen AG to be its strategic partner, the minister said what the company needed was a technical partner rather than an equity partner.

She stressed that Proton should also be given a chance to prove itself and the company had skilled personnel who knew when a technical cooperation should be undertaken.

“Without a partner, Proton has managed to extricate itself from a difficult situation. When they prepare a plan and implement it, I am confident they have the ability to advance,” Rafidah said.

22-11-2007: Proton skids to 7-year low

KUALA LUMPUR: Proton Holdings Bhd’s share price plunged 18.6% to a seven-year low of RM4.02 yesterday as investors dumped the stock after the government backtracked from an earlier decision to seek a foreign partner for the beleaguered national carmaker.

Analysts said investors were not convinced Proton could do well on its own and were stunned by the government’s flip-flop on the matter. In response, Prime Minister Datuk Seri Abdullah Ahmad Badawi insisted that Proton was “doing well” and said that there was no issue of the government bailing out the carmaker.

Sliding from the opening bell, the stock plunged to its intra-day low of RM3.98 before recovering slightly to close 92 sen lower at RM4.02. Sentiment in the stock was made worse by the overall weak market, which saw the Kuala Lumpur Composite Index falling 11.85 points to 1,359.85.

“No, no, there is no question of bailing out. Proton is doing well today,” he told reporters on the sidelines of the East Asia Summit in Singapore yesterday. “Proton has started turning around now.”

“(The) Proton management has already demonstrated the ability to turn around. The situation that Proton is in today is not the same like two, three years ago,” he said, adding that it would bring new models to the market.

“We have asked Proton to have a turnaround plan, in the same way Malaysia Airlines achieved a turnaround,” he said. According to news wire reports, Abdullah stressed that Proton had taken the initiative to export its cars to Indonesia, India, China and the Middle East.

On Tuesday, Second Finance Minister Tan Sri Nor Mohamed Yakcop shocked analysts and investors alike when he announced that the government had decided to withdraw from talks with Volkswagen AG and General Motors to sell a strategic stake in the national car project.

He had said the decision was made by the Cabinet Committee on National Automotive Policy (headed by the deputy prime minister) following a final reappraisal of whether the time was right to enter a strategic alliance with a major car manufacturer.

In what appeared to be frenzied selling following the shocking decision, nearly 16 million Proton shares changed hands as, among others, CIMB Research maintained its underperform on the counter and TA Securities advised investors to sell the stock.

Automotive analysts did not mince their words in expressing dismay at the premature end to negotiations and said issues including the bumiputera vendor programme and Proton’s status as a national project could have influenced the government’s decision.

In no uncertain terms, CIMB Research said the latest development would hurt Proton’s aspirations to be become a reputable regional auto player.

Expressing disappointment and saying it was “taken aback” by the decision, it said questions remained concerning Proton’s long-term viability given further liberalisation of the local auto industry, the influx of new competitive models and competition from foreign carmakers.

“Proton lacks global competitiveness as it has a poor brand image, no real global presence to speak of and lacks the necessary technology to compete against other carmakers.

“With the latest turn of events, we expect Proton to remain largely a localised auto manufacturer despite recent ventures into China and Iran. These projects are very preliminary and entail high execution risks, especially in the cut-throat Chinese market,” it said.

The research house said contrary to the Proton management’s and the government’s belief, VW would not be interested in restarting talks at a later stage given that it had been spurned twice in three years.

News reports have it that VW, Europe’s biggest carmaker, is already looking for a new Asian partner and will be focusing on Indonesia and Thailand.

On Proton’s earnings outlook, CIMB Research forecast the national carmaker to narrow its losses to RM333.6 million next year and RM166.7 million in 2009 from a net loss of RM591.3 million for the financial year ended March 31, 2007.

On its valuation for Proton, it said: “We are applying a wider discount to net tangible assets (NTA) to factor in higher risks and Proton’s poorer prospects as it goes alone.”

“We now use a valuation parameter of 0.4 times CY08 NTA instead of 0.5 times CY07 NTA. Hence, despite rolling over our valuation horizon, we have cut our target price from RM4.52 to RM3.50,” it said.

Meanwhile, TA Securities Research forecast Proton’s losses in 2008 and 2009 to narrow to RM158.3 million and RM119.8 million, and expects the carmaker to register a net profit RM9.4 million in 2010.

The research house also pointed out that as in all the previous negotiations with potential foreign partners, no details were publicised by the government as to the reasons for talks to cease, leaving investors to play a guessing game.

“We suspect the substantial shareholder (Khazanah) has too many uneconomical conditions from the perspective of VW that led to such a disappointing outcome. The shareholder is under pressure to entertain demands from many quarters, most of which are under the banner of serving national interest.”

TA Research said the government could have feared that VW would only use Proton solely as another production line to serve its own presence in the region. “As Proton is a national project, the government would definitely like to see the brand name have an indefinite life. It is a matter of pride for the government,” it said.

It said while the government was betting on Proton’s better-than-expected performance in the last three months in terms of domestic sales, as well as its overseas plans for China, Indonesia, Iran and impending exports to Thailand, the sustainability of the growth was in question.

“We do not dare bet our dollars on it as we believe the industry is a numbers game. To establish oneself on a global scale, one would need strong sales numbers and economies of scale to cushion the fierce price war. And Proton does not even have this at home, let alone overseas.

“It still needs the network and a very strong brand name to catapult itself in overseas markets. It does not help to address quality perception issues at home and hope that overseas market sees the same,” said TA Research.

We Will Continue To Introduce New Models, Says Proton MD

KUALA LUMPUR, Nov 20 (Bernama) -- Proton will continue to introduce new models and expand significantly overseas by making inroads into Iran, China, Indonesia and Thailand soon among the current 24 markets it is already in.

"This will complement the improvements in the domestic market," its managing director, Datuk Syed Zainal Abidin Syed Mohamed Tahir said here today.

Responding to the government's decision announced today to call off negotiations for a possible alliance between the national car maker and Volkswagen or General Motors, he said Proton had been working on several initiatives even before negotiations began.

"These include new model development, quality improvements, dealer network consolidation and operational efficiency and export expansion," he said in a statement.

"We are now seeing some initial results of these initiatives, in particular the successful launch and reception of Persona, resulting in increased confidence amongst our customers and business associates as well as market share gains," said Syed Zainal.

He said Proton respects the government's decision.

Besides preservering to introduce new models in the future while meeting customers' expectations in service and product quality, efforts would continue in enhancing operational efficiency as well as dealer and vendor consolidation.

"This latest development, however, does not detract Proton from continuing its efforts to seek opportunities to enhance our product portfolio, access to markets, technology and operational efficiencies."

"All these will add value and place Proton in a better position for any potential future strategic partnership," he said.

-- BERNAMA

Proton Ends Talks With Volkswagen & General Motors On Possible Alliance

KUALA LUMPUR, Nov 20 (Bernama) -- Proton Holdings Bhd has ended negotiations with German car manufacturer Volkswagen and General Motors Corporation of America for a possible alliance as the fortunes of the national car maker in terms of sales and exports are improving.

Khazanah Holdings Bhd, as the major shareholder of Proton and the investment arm of the government, said in a statement here today the government has taken note of the recent positive developments at the national car maker.

"The government is, therefore, of the view that Proton's management should be allowed to continue with its plans to further strengthen the company," Khazanah said.

"The issue of strategic alliance, if necessary, can be considered at a later date," it said.

Proton first announced its intention to begin talks with Volkswagen in October 2004 for a strategic partnership while talks were to have started with GM early this year.

Second Finance Minister Tan Sri Nor Mohamed Yakcop, in a briefing here today, said Volkswagen did not walk away from the negotiations nor was there any breakdown in the talks.

Nor Mohamed said the turnaround seen at Proton in recent months was real and as such, the earlier assumptions that Proton has to have a foreign partner to stay afloat was no longer applicable.

He, however, said the government will not dismiss the possibility of Proton having strategic alliances with foreign partners in the future when the time is more appropriate and this will also be premised on the fact that Proton will be negotiating from a stronger position.

Proton's latest model, the Persona, registered strong sales with bookings of about 22,000 units by end-October following its launch in mid-August.

Proton also recently secured a deal to export 5,000 Wajas to Iran and plans are afoot to assemble 40,000 Wajas there annually by 2012.

-- BERNAMA

Proton Ends Talks With Volkswagen & General Motors On Possible Alliance

KUALA LUMPUR, Nov 20 (Bernama) -- Proton Holdings Bhd has ended negotiations with German car manufacturer Volkswagen and General Motors Corporation of America for a possible alliance as the fortunes of the national car maker in terms of sales and exports are improving.

Khazanah Holdings Bhd, as the major shareholder of Proton and the investment arm of the government, said in a statement here today the government has taken note of the recent positive developments at the national car maker.

"The government is, therefore, of the view that Proton's management should be allowed to continue with its plans to further strengthen the company," Khazanah said.

"The issue of strategic alliance, if necessary, can be considered at a later date," it said.

Proton first announced its intention to begin talks with Volkswagen in October 2004 for a strategic partnership while talks were to have started with GM early this year.

Second Finance Minister Tan Sri Nor Mohamed Yakcop, in a briefing here today, said Volkswagen did not walk away from the negotiations nor was there any breakdown in the talks.

Nor Mohamed said the turnaround seen at Proton in recent months was real and as such, the earlier assumptions that Proton has to have a foreign partner to stay afloat was no longer applicable.

He, however, said the government will not dismiss the possibility of Proton having strategic alliances with foreign partners in the future when the time is more appropriate and this will also be premised on the fact that Proton will be negotiating from a stronger position.

Proton's latest model, the Persona, registered strong sales with bookings of about 22,000 units by end-October following its launch in mid-August.

Proton also recently secured a deal to export 5,000 Wajas to Iran and plans are afoot to assemble 40,000 Wajas there annually by 2012.

-- BERNAMA

19-11-2007: Proton to attract attention on imminent VW deal

KUALA LUMPUR: Proton Holdings Bhd is expected to continue attract ing investors’ attention in view of an impending sealing of an agreement with Germany’s carmaker Volkswagen AG (VW).

The stock rose as much as 18 sen last Friday, but eased at the close with an eight sen gain to RM5, with a total of 2.65 million shares traded.

The Edge Financial Daily reported last Friday that the government was close to inking a memorandum of understanding with VW entailing collaboration in the areas of manufacturing, marketing and distribution.

Analysts said a tie-up with a foreign carmaker would be an added advantage for the national carmaker to be more innovative in terms of its models’ designs and in marketing.

OSK Investment Bank analyst Jeremy Goh said Proton’s prospects seemed quite good in the short term, adding that the key point for the deal to take place was that the government must give up mangement control to VW.

“What Proton needs to do is to create whole new models by itself; in order to do that, they need to create a new platform. If Proton can’t get the deal, they can’t get the new platform.

“Proton currently is in a tight cash position, and cannot afford to invest in a new platform,” he said.

He said that since the launch of Persona, things were starting to look better for Proton, which is experiencing an increasing market share. Goh expected Proton to narrow its losses in FY08 due to the launches of new models, leading to a breakeven by FY09.

On the other hand, Affin Investment Bank analyst Jason Yap said that he liked the stock even without VW.

“Proton has turned around since May 2007 with the help of the new models they have launched — Persona, sport edition of Savvy and Satria Neo — as well as the soon-to-be launched (Jan 2008) BLM model, a replacement for the existing Iswara,” Yap said.

He added that the turnaround showed that the management was heading in the right direction.

Yap said Proton’s sales volume and market share had been on an upward trend since May 2007, and believed that it would soon outpace the total industry volume (TIV) recovery in the coming months, especially after the launch of its new BLM model.

He said Proton’s monthly market share had also improved from a low of 20% in May 2007 to 30% now, mainly at the expense of Perodua, whose monthly market share had been declining since June 2007. Perodua remains the market leader with a share of 34%, followed by Proton (23%), in the nine months to September.

Yap said a tie-up with VW was definitely an added advantage to Proton in terms of technology and market access. It could also resolve the problem of underutilisation of its Tanjung Malim plant, currently at more than 50%.

He said the fixed overhead cost at the Tanjong Malim plant was very high, and VW could pay for a portion of the overhead costs if the partnership were to materialise.

Affin has maintained its Proton’s target price at RM6.40 based on a price over net tangible asset of 0.7 times.

Proton Expands Global Footprint Via Deal To Supply 5,000 Waja Taxis To Iran

TEHRAN, Nov 8 (Bernama) -- National car maker Proton has further boosted its export market with an order to supply 5,000 units of the Waja to be used as taxis in Iran.

In what is seen as a significant deal, the Proton Wajas would replace old taxis as part of the US$200 million urban public transportation renewal initiative spearheaded by Zagross Khodro Car Industries Co, its sole assembler and distributor in Iran.

Proton Waja, one of the models designed and developed ground-up by Proton, is marketed as "Impian," in Iran and a few other export markets.

Proton Holdings Bhd managing director, Datuk Syed Zainal Abidin Syed Mohamed Tahir, said the supply of 5,000 units of the Proton Impian taxi takes the partnership between Proton and Zagross Khodro to new heights as it would drive a new taxi operators' model in Iran.

"Spurred by this, we have put efforts to expedite the commencement of assembly operations of the Proton Gen2 in Zagross Khodro's plant in Broujerd.

"Once gazetted, this would be the second assembly operations of Proton cars in Iran after the Wira," he said in his speech after the unveiling of the new taxi here.

The deal was sealed when Minister in the Prime Minister's Department Datuk Seri Mohd Effendi Norwawi and First Deputy Mayor of Tehran, Tashakkori officially unveiled the Impian taxis at a ceremony held at the Rayzan International Conference Centre here Thursday.

Syed Zainal said Proton was confident that the Zagross Khodro group would be successfully involved in the complete value chain of taxi operations.

This initial order would pave the way for the transformation of the public transportation landscape in Iran as well as significantly boost Proton's exports, he said.

Todate, sales of Proton cars in Iran have totalled 9,634 units since its entry into the country's automotive market in 2002.

It would also raise prospects for higher exports by Proton with the Iranian government's plan to increase the current taxi car population of 70,000 to 100,000 units.

Since many taxis operating in Tehran are aging and technologically outdated, measures have been put in place to upgrade or replace a majority of them.

Mohd Effendi is here on the final leg of a mission leading a 40-member delegation to the United Arab Emirates and Iran from November 5-11.

It aims identify potentially large business opportunities for Malaysian companies and explore strategic joint ventures through alliances with Middle Eastern firms and for them to invest in the Iskandar Development Region (IDR), Northern Corridor Economic Region (NCER) and the Eastern Corridor Economic Region (ECER).

Syed Zainal also said the Proton Impian taxi provides good levels of comfort, luxury and style while enhancing the passengers' travelling experience.

"We are looking forward to the implementation of this operation model, in which Zagross Khodro group will be involved in the complete taxi operation value chain from importing, owning and after-sales support of the taxi cars to its operations," Syed Zainal said.

Expressing optimism over prospects in the Iranian automotive market, he said Proton would work closely with Zagross Khodro for Proton cars to make further inroads and to grow its potential in Iran.

"Of more significance, this initiative will not only improve the performance of taxi services in Tehran but also create 12,000 job opportunities," he said.

Zagross Khodro, a subsidiary of the Akshan Group of Companies, has diversified into many businesses.

It began its businesses with Proton in 2001 through the assembly of Wira and the import of the Gen2 for the Iranian market.

The company currently operates with nine dealers with 35 facilities covering sales, service and spare-parts in Tehran and is the midst of expanding the network by up to 34 dealers throughout the country.

Zagross Khodro's managing director, Dr Siroos Gholami, said the Proton Impian Taxi would significantly enhance Proton's presence in the market.

-- BERNAMA