KUCHING: Analysts are generally positive on the Government’s approval of Proton’s application for a RM1.5 billion soft loan, which will enable Proton to make payments to its vendors.
According to RHB Research Institute Sdn Bhd (RHB Research), the Government has approved Proton’s application for a RM1.5 billion soft loan after a Cabinet meeting last Friday.
“The funding, which would help Proton meet its immediate financial commitments, comes a week after Tun Dr Mahathir Mohamad resigned from his position as chairman of the national car maker.
“While Tun is Proton’s biggest supporter, his political stance has affected the company’s ability to secure additional government assistance,” the research house said.
RHB Research highlighted that International Trade and Industries Minister Datuk Seri Mustapa Mohamed said Cabinet agreed to the loan on condition that Proton formulates a comprehensive turnaround plan to improve its competitive edge at the international level.
The research house noted Mustapa had said that Performance and Management Delivery Unit (Pemandu) chief executive officer (CEO) Datuk Seri Idris Jala would head a special taskforce overseeing this turnaround, which would also include three government appointments and three appointments from the private sector.
“In an earlier statement, Mustapa said that government assistance was conditional on the identification of a foreign strategic partner,” it said. In addition to a new CEO, RHB Research expected to see some new Proton models emerging over the next 12-18 months beginning with the Perdana.
RHB Research noted that this is a D-segment product that uses a re-skinned version of the previous generation Honda Accord.
“A new Persona which is a sedan version of the Iriz hatchback is expected by end-2016,” it said. “The first product from the collaboration with Suzuki is reported to be a three-row, seven-seater multi-purpose vehicle (MPV).”
The research house believed that new product offerings should freshen Proton’s model line-up and appeal to a wider range of potential customers.
“Risks include a weakening of the RM and a deterioration of consumer sentiment,” it added.
The research house left its estimates unchanged for now, pending greater clarity on Proton’s revamped business model.
As for the research arm of Hong Leong Investment Bank Bhd (HLIB Research), it was positive on the announcement.
HLIB Research pointed out that the RM1.5 billion soft loan grant will be able to recapitalize Proton’s depleting war chest for transformation and restructuring.
“The continued intense competitions within the automotive industry and weak consumer sentiments, as well as ringgit depreciation have hit Proton’s profitability and cash flow to support its research and development and operation.
“Furthermore, the new task force shows government’s strong view on Proton’s important role within the automotive industry and commitment to ensure a successful turnaround and growth sustainability of the national carmaker,” it said.
HLIB Research noted on the government’s effort and support for Proton, but the research arm believed Proton’s turnaround lies on the public perception towards its products.
“Proton is working towards improving its products and services as part of its effort to repair and reverse its negative brand perception,” the research arm observed.
DRBHCOM (1619) - Govt approval of Proton’s RM1.5 billion soft loan positively viewed by analysts
http://www.theborneopost.com/2016/04/12/govt-approval-of-protons-rm1-5-billion-soft-loan-positively-viewed-by-analysts/
