In my earlier post on DRB-Hicom, i explained why the market had become overhyped on DRB-Hicom on ongoing Proton turnaround.
The share price had surged 50% from May to RM 2.95 historical high in a short span of 3 months. It is true that Proton turnaround is like a 99% likelihood event. But many investors forget the fact that DRB-Hicom is a large conglomerate with huge debt piles sitting on its balance sheet. Proton turnaround is already happening but it also takes time for traditional business like automobile manufacturing to show strong earnings growth. It also takes times to restore consumer confidence in its products. There is no doubt that DRB-Hicom will be worth a lot more once Proton regains its long-lost No.1 market share in Malaysia automobile market.
However, investors must not forget the fact that global economy is in escalating trade war between the two largest economies in the world. Any decelerating growth rate will trigger a rippling effects across the global economy.
Crude oil price has already declined to US$60 per barrel level, that is US$10 per barrel below Malaysia government fiscal budget.
Any more negative macro news is going to put a dent Malaysia economic outlook, and hence affecting the automobile sales in the country.
Investing is a very complicated game as there are simply too many variables involved that cannot be measured accurately using any mathematical formulae.
Some sell side analysts raised their target price to above RM 4.00 level and immediately lower it back to RM 3.00 after seeing the sharp decline in share price over the past week.
Well, predicting share price in the near-term is impossible. Maybe it is wiser to think longer-term.