28-12-2007: Proton unlikely to sell off Lotus, says Affin Research

KUALA LUMPUR: Proton Holdings Bhd is unlikely to sell off its 63.75% subsidiary Group Lotus Plc in the near to medium term, as Lotus is Proton’s technological arm that developed the Campro engine for all current and future models of Proton cars, Affin Investment Research said.

It said Proton had also signed an agreement to allow Youngman of China access to Lotus technology in return for a royalty fee, thus selling off Lotus might result in a breach of agreement.

Proton needed the Campro technology to operate independently, given the absence of a foreign strategic partner, it said in a commentary on a news report that an interested party had approached Proton for its stake in Lotus.

“However, everything ultimately boils down to the valuation and major shareholder Khazanah Nasional Bhd’s plan,” it said.

The research house has maintained its add rating on Proton with an unchanged target price of RM6.40 based on a price to net tangible assets (P/NTA) of 0.7 times. It is also maintaining its earnings forecast for Proton, pending further development.

“The interested party is reported to be also involved in the car-making and assembling business in Malaysia. We understand that local parties like Naza, DRB-Hicom and Mofaz Group, have in the recent past expressed their interest in Proton,” it said, noting that Proton had yet to confirm the report.

“We will be disappointed if Proton is to dispose off Lotus — being its key research and development arm, at this juncture in the absence of a strategic partner,” it added.