KUCHING: DRB-Hicom Bhd (DRB) is expected to chart better recovery ahead with the resumption of economic activities and with the extension of the sales tax exemption period for passenger vehicles, analysts observed.
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) noted that DRB’s first nine months of the financial year 2021 (9MFY21) results saw significantly higher core losses of RM362 million compared to core losses of RM255 million for 9MFY20, which was mainly due to the closure of the automotive sector during pandemic lockdown.
Furthermore, it pointed out that its services segment sales (down five per cent) mostly were dragged by Pos Malaysia’s contribution following the decrease in mail (down 20 per cent) and parcel volumes handled especially from contract customers affected by another lockdown (that started in June 2021), though cushioned by slight improvement from normalisation on Bank Muamalat.
Its property sector (50 per cent decline) contribution is expected to see weaker growth with the completion of both Media City and Northern Gateway Infrastructure projects.
Nevertheless, it opined that Proton and Honda are expected to chart a better recovery post lockdown in tandem with resumption of economic activities and lifting of inter-state travels.
“During this sales tax exemption period (until June 2022), the group’s marques are expected to boost their sales performance by featuring new or revised models,” it said.
Aside from that, it highlighted that despite the challenging environment, Pos Malaysia’s on-going transformation efforts will augment the improved tariff rates and growing demand for ecommerce.
“Other businesses in the group will continue to adapt to the ‘new normal’ environment to ensure financial sustainability, against the backdrop of changes in consumer behaviour,” it added.
Meanwhile, the research team at Public Investment Bank Bhd (PublicInvest Research) pointed out that automotive segment remains key contributor and is expected to drive earnings growth for the group.
“With the resumption of economic activities, Proton and other marques within the Group will continue to ramp up production and accelerate delivery to meet surging demand, underpinned by extension of sales tax exemption for passenger vehicle until June 30, 2021. Proton delivered 10,380 units in September compared with 2,741 units in August and 1,904 units in July during the lockdown.
“The lifting of interstate travel ban and gradual re-opening of borders is expected to boost the group’s other business segments such as logistics, defence, banking and concession,” it said.
All in, PublicInvest Research retained its ‘outperform’ rating on the stock while Kenanga Research downgraded its call to ‘market perform’ from ‘outperform’.
It noted that for the immediate term, it expected the global supply chain issues to continue affecting its high-margin models of X70 and X50 with waiting period reaching up to six months.