PP 7767/09/2010(025354)

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Group
Company No: 233327 -M

New s Upda te 23 June 2010

MARKET DATELINE

Proton Holdings Share Price

Fair Value
:
:
RM4.69
RM5.50
Proton And Lotus To Develop Small Hybrid Cars Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (PROTON; Code: 5304) Bloomberg: PROH MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/CF P/NTA ROE# Gearing GDY
Mar (RMm) (RMm)# (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2009 6,486.6 40.0 7.3 2.5 64.5 (3.4) 0.6 0.8 Net Cash 1.1
2010f 8,232.9 248.1 45.2 521.0 10.4 47.0 (14.5) 0.5 4.7 Net Cash 0.0
2011f 7,611.0 358.4 65.3 44.4 7.2 57.0 (34.7) 0.5 6.3 Net Cash 0.0
2012f 7,839.4 385.4 70.2 7.5 6.7 60.0 (47.3) 0.5 6.3 Net Cash 0.0
Main Market Listing / Non-Trustee Stock / Syariah-Approved Stock By The SC # Normalised * Consensus Based On IBES

♦ Proton and Lotus to jointly develop small hybrid cars. Proton and its
Issued Capital (m shares) 549.2
wholly-owned subsidiary Lotus, will jointly develop small cars with hybrid
Market Cap(RMm) 2,575.8
technology for the global market. The model is expected to be launched in
Daily Trading Vol (m shs) 1.0
the next 18-24 months as part of their strategy to enter into the global 52wk Price Range (RM) 2.53-5.03
market that entails industry players to come out with small, fuel efficient Major Shareholders: (%)
and environmental friendly cars. Khazanah Nasional 42.7
EPF 14.4
Petronas 7.9
♦ Cars to be sold in the global market. The small cars, which are
expected to have an engine capacity ranging from 1-1.5 litres, will be sold FYE Mar FY10 FY11 FY11
in markets that both Lotus and Proton operate in, i.e. Singapore, EPS chg (%) - - -
Indonesia, Thailand, UK, Australia, South Africa, Turkey and Iran. Var to Cons (%) -7.8 +12.7 +14.5

PE Band Chart
♦ Lotus’ five-year transformation plan. Lotus has also rolled out a five-
year transformation plan under its new CEO Dany Bahar which entails PER = 8x
PER = 6x
among others, tripling of its annual production from 2,500 cars to 8,000 PER = 4x
cars by 2015, having been loss making in the past decade.

♦ Execution is key. We are positive on the latest development but we

believe execution remains the key.

Relative Performance To FBM KLCI

♦ Key risk. The key risk to our projection would be: 1) lack of economies of
Proton Holdings
scale and expertise; and 2) lack of global distribution networking

♦ Forecasts and assumptions. We are keeping our numbers for the time
being as the hybrid cars are only expected to go into production in 2012- FBM KLCI
2013.

♦ Investment case. We see this as a positive move by both companies as

Proton has yet to fully utilise the technology that Lotus has to offer and
its iconic brand since its acquisition a decade ago. Hence, we are Joshua CY Ng
maintaining our Outperform rating on the stock with a fair value of (603) 9280 2151
joshuang@rhb.com.my
RM5.50 based on stripped down book value.

Please read important disclosures at the end of this report.

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 23 June 2010

Table 2: Stripped Down Book Value

RMm Mar-10
Shareholders' Funds 5,352.470
Shares o/s (m) 549.213 Shares o/s remained unchanged.

Stripped down items: RMm Remarks

Goodwill 29.008
Intangible assets 549.94 Increased 21.5% qoq.
Inventory 365.3 Assumed that 70% is written off.
Receivables 296.9 Assumed 70% of receivables is written off.
Plant & Equipment and Furniture & Fittings 1,085.3 Assumed 30% is written off.
Sub-total 2,326.15

Stripped down BV 3,026.32

Fair Value (RM/share) 5.50

Source: RHBRI

Table 3: Earnings Forecasts Table 4: Forecast Assumptions

FYE Mar (RMm) FY09 FY10F FY11F FY12F FYE Mar FY10F FY11F FY12F

Turnover 6,486.6 8,232.9 7,611.0 7,839.4 Domestic sales (k units) 150.5 159.2 163.7
Turnover growth (%) 15.4 26.9 9.0 3.0 Export sales (k units) 22 23 25

Cost of Sales 6,738.7 8,280.9 6,826.1 7,024.2

EBITDA (252.1) (48.0) 784.9 815.2

EBITDA margin (%) (3.9) (0.6) 10.3 10.4

Depreciation 401.7 398.0 402.0 406.0

Net Interest 15.6 11.6 16.0 18.8
Associates 28.6 18.8 33.0 36.3
EI (360.3) 9.0 0.0 0.0

Pretax Profit (337.6) 285.0 431.9 464.3

Pretax margin (%) (5.2) 3.5 5.7 5.9
Tax 17.2 (45.9) (73.4) (78.9)
PAT (320.4) 239.1 358.4 385.4
Minorities 0.0 0.0 0.0 0.0
Net Profit (320.4) 239.1 358.4 385.4
Normalised NP 40.0 248.1 358.4 385.4
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

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of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
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This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

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actions of third parties in this respect.

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