Majority of you guys seem to like proton cars a lot ah? Its not even the month of patriotism So what you guys find interesting about this company? Leave a comment down below.
So let’s get on with the analysis, since many of you guys voted DRBHCOM in the group poll votes, so we will do it, it’s not like we wanted to but for you guys we will “tsundere mode”.
Link to our website: http://12invest.my/…/05/04/drbhcom-1619-stock-analysis-par…/
So what is DRBHCOM? When you hear automotive industries in Malaysia the first thing that comes in our minds is “PROTON” but what’s so good about it? My own proton preve also got gear box problem but why do people still choose proton, is it because it’s cheap? The reason why it’s cheaper than other cars is mainly because it’s from Malaysia so we get to avoid the large “tax” that the government impose for other brand of cars. In the picture below you will see the percentage of tax the gov impose to import cars to Malaysia. Those rich Uncles only can afford imported cars while we millennials probably go for a cheaper option which is proton cars.
But wait, although DRBHCOM is mainly about automotive but it has other sectors as well such as services and education, and property, asset, and construction. The group owns the national car brand called PROTON which has undergone a turnaround when a China company called Zhejiang Geely Holding Group Co., Ltd. (“Geely”) got a hold of DRBHCOM and signed an agreement to take 49.9% equity in PROTON Holdings Berhad. To be honest by comparing DRBHCOM and Geely Automobile Holdings Ltd the clear winner would be Geely, this is due to the financials for Geely is much more stable and they are more profitable but if you believe in Geely then they just might have a chance to prove themselves with PROTON. But like I said they don’t own DRBHCOM just PROTON Holdings Berhad only keep in mind.
With the boost of sales of the new PROTON X70, DRBHCOM’s latest quarterly report spiked by about 204%. They sold a record figure of 2,979 X70 cars in March alone which is the highest ever SUV sales in Malaysian history. This has really boosted up the profitability of DRBHCOM and turn from around negative 227.7mil in 2017 to a positive profit of around 415.15mil in 2018 with an EPS of 25.78. Has Geely turned around this company like Elon Musk turned around Tesla? Hmm for that we really need to goo deeper into DRBHCOM’s financials which will be in Part 2 of this Analysis.
DRBHCOM Sector Breakdown
This is the group’s largest revenue sector that contributes most of DRBHCOM’s revenue. This sector is affected by the sales of PROTON cars. Things that affect this sector is also the cost of raw materials to build cars, this will reduce the profit margins which will directly affect the profit of this sector. This sector is also focusing on aerospace and the manufacture of industrial and other components. One of the risks of this sector is Low Sales due to market condition, when everyone is afraid of global economic slowdown they wont be thinking about taking up loans to buy a car. Another risk would be depreciating Ringgit and foreign exchange risk, they buy raw materials from other countries thus their cost basis is according to the country’s price, if ringgit is depreciating it means they need more money to buy goods. Another reason why this sector is the biggest is also because DRBHCOM is also an automotive distributor to some brands such as Audi, Volkswagen, Mitsubishi and Isuzu brands, and distribution of national motorcycles brand such as MODENAS. As a whole, DRBHCOM was ranked second in the Malaysian automotive market with 33.1% market share from all brands distributed in Malaysia in FY2017/18.
Their Services Sector provides key diversification for DRB-HICOM Group into postal, courier and logistics, as well as waste management and environmental services, vehicle inspection, banking and the education sectors. Courier and logistics are fast-growing segments as people tend to buy things online nowadays. The group also holds POS Malaysia Berhad amounting to 53.50%, everyone in Malaysia has heard of POS Malaysia or POS laju, it also contributes to DRBHCOM’s revenue but it’s a smaller sector compared to their automotive sector.
Yes, DRBHCOM also holds several properties which includes construction in Media City in Kuala Lumpur and the Immigration, Customs, Quarantine and Security ("ICQS") Complex in Alor Setar, Kedah. Their properties sector has been slowing down the same with any other property / construction companies in Malaysia, recently the group has also disposed 10 property assets held by DRB-HICOM's subsidiary companies, thus you will see their assets in their balance sheet reduced while their cash increased.
In Part 2 of our analysis we will be including DRBHCOM’s financials, profitability and future growth, stay tuned and don’t forget to like and share our posts for more of these kind of posts in the future
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