KUALA LUMPUR (Aug 29): Shares of DRB-Hicom Bhd (KL:DRBHCOM) fell on Thursday to their lowest in more than two years, after the automotive-to-postal conglomerate reported weaker-than-expected results.
DRB-Hicom fell as much as 5.7% or seven sen to RM1.16, its lowest since July 2022. The stock was trading at RM1.17 at 9.15am, giving the company a market capitalisation of RM2.26 billion. Trading volume totalled 496,500 shares so far.
At least three analysts trimmed their earnings forecasts and target prices (TPs), as net profit for the first half ended June 30, 2024 (1HFY2024) only accounted for less than one-third of the consensus full-year estimate. Analysts also remained divided, particularly over the outlook on the company’s mainstay automotive business.
“We are cautious on its outlook, as rival Perodua is turning up the heat with aggressive new launches,” said Kenanga Investment Bank, which kept the stock on ‘market perform’, equivalent to a ‘hold’ call.
The house also flagged earnings drags from some of the company’s non-performing units, and slashed its forecasts by 21% for FY2024 and 10% for FY2025, lowering its TP to RM1.30 from RM1.40.
DRB-Hicom shares have declined some 15% so far this year following Thursday morning’s decline. The company’s listed subsidiary Pos Malaysia Bhd (KL:POS) in particular has suffered 22 consecutive quarters of losses.
Out of four research houses covering DRB-Hicom, two have the stock on ‘buy’, while the other two recommend ‘hold’. The consensus 12-month TP is RM1.41 following the latest cuts, according to Bloomberg.
Hong Leong Investment Bank, which maintained its ‘buy’ call on DRB, shrugged off the soft quarter dragged by a shorter working quarter and scheduled plant shutdowns, as well as higher provisions at Bank Muamalat Malaysia Bhd and reduced volume at Pos Malaysia.
“We remain positive on DRB-Hicom’s outlook on strong automotive sales growth potential, as Proton achieved record high monthly sales in July,” the house said. Further, the company will also benefit from sustained demand for Honda and Mitsubishi vehicles, it added.
On Wednesday, DRB-Hicom reported a net loss of RM17.08 million for the second quarter ended June 30, 2024 (2QFY2024), against a net profit of RM33.71 million a year earlier, mainly due to Proton Holdings Bhd and losses from Pos Malaysia as well as higher tax expenses.