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DRB-Hicom to pay dividend despite capexTuesday, 02 September 2014DRB-Hicom Bhd plans to keep rewarding its shareholders with a dividend payout despite requiring money to grow the group’s automotive, logistics, property and services businesses.Group MD Tan Sri Mohd Khamil Jamil said the group plans to spend about RM2 billion in capital expenditure (capex) with money coming from internal and external sources but it also aims to maintain a dividend payout rate of about 30% of net profit.“The group capex next year is about RM2 billion to expand for auto, logistics, college and property development and other businesses.We will look at the return on investment to make sure shareholders’ interest is protected and we pay a dividend consistent with the past years,” he told The Malaysian Reserve recently in an interview.The group paid out a dividend of six sen on earnings per share (EPS) of 23.6 sen for the financial year ended March 31, 2014 — the fourth year running the group has paid a six sen dividend.The group posted a strong firstquarter ended Jun 30, 2014, with net profit hitting RM107 million or EPS of 5.58 sen with a strong performance in all its business segments.The group’s short-term and long term borrowings stand at about RM7 billion, with a gearing ratio of 0.9 times and RM2.5 billion in cash as at the end of June 30, 2014.Public Investment Bank Bhd, in a recent report, maintained an ‘Outperform’ call with a target price of RM3.20 per share for DRB-Hicom on expectation of future earnings growth.The group stands to get about RM374 million from the sale of its 68.1% stake in UniAsia General Insurance Bhd to foreign buyers. Part of the proceeds will be used to repay debt and the rest to be used internally, said Mohd Khamil who believes the current gearing of the group is at a manageable level.Another potential cash inflow could come from the sale of a 30% stake in 70%-owned subsidiary Bank Muamalat Malaysia Bhd as required by Bank Negara Malaysia.“We would like to hold at least a 40% stake in the bank which complements the group’s other businesses. We are looking for a potential partner who can take the bank forward to the next level,” said Mohd Khamil.The Shariah-based lender has a network of 59 branches, a loan to deposit ratio of 69.3% and an asset base of RM20 billion with paid-up capital of RM1.7 billion.“We want to position Bank Muamalat as a mid-size banking group with a focus to improve services in the corporate services such as advisory business, underwriting and have its own debit card and credit card,” said Mohd Khamil, adding that the bank posted a record pretax profit of RM200 million in its last financial year.With margins from its main automotive manufacturing business falling under stiff competition, the group plans to unlock value in its concession, property and logistics businesses, according to Mohd Khamil.The solid waste management business under 97.5%- owned subsidiary, Alam Flora Sdn Bhd, is set to expand its footprint and services.Its current concession covers Putrajaya, Pahang and Kuala Lumpur, and it expects to win a 22-year concession soon to do the same in Kelantan, starting with Kota Baru.“We expect to sign the concession agreement in October.We are also negotiating with Terengganu. Alam Flora is one of the companies in the group that has a sustainable longterm business,” he said.The company also sees potential revenue in solid waste management value chain activities, such as recycling and waste to energy, which it can pursue.“We are looking at opportunities in incinerators and biogas and moving from scheduled waste to non-scheduled waste (construction and industrial waste), which is not under Alam Flora's current concession terms,” Mohd Khamil said.Alam Flora currently employs some 3,700 people directly and owns a fleet of 474 compactors/ lorries.The company only does about 30% of the works in the concession while 70% is subcontracted to encourage the development of such businesses but still supervised by Alam Flora.
Mohd Khamil expects the group’s logistics business to double its revenue of about RM400 million in two years from significant synergistic growth opportunities within the group and through third party services.The group believes there are ample opportunities to grow the business as the logistics industry turnover, which last year amounted to about RM120 billion, is forecast to rise to RM200 billion by 2020.DRB -Hi com now has strong presence in the sector to capitalise on.Wholly-owned KL Airport Services Sdn Bhd handles cargo movement via airports such as KLIA, KLIA2, Langkawi, Kota Kinabalu and Penang, while Konsortium Logistik Bhd owns some 420 prime movers to move the goods.The group's 32% stake in Pos Malaysia Bhd provides the last mile connectivity to customers across the country.
DRB-HICOM BHDBy PublicInvest ResearchTarget price: RM3.20OutperformDRB-Hicom Bhd’s new Proton Compact Car (PCC) is believed to be a new B-segment hatchback model that will be launched this month.“We believe the PCC is a mass market car that will be critical for Proton to achieve the economies of scale for the auto-maker to turn profitable (break-even sales volume for Proton is estimated to be around 150,000 units per annum,” PublicInvest Research said. It added that PPC was critical for Proton because DRB-Hicom had been struggling to sell the volume required to turn profitable since acquiring the company in 2012.“The volume required is estimated to be around 150,000 units per annum. Judging from pictures and specifications, we believe the PCC will be a game changer for Proton to compete more effectively in the mass market B-segment against the incumbent leader, Myvi.” However, the acid test of PCC will be consumer reception and review of the new car.Although Proton has not officially launched the PCC, various sources have quoted a few variants of the B-segment hatchback including 1.3-litre and 1.6-litre engines with variable valve timing.“We reiterate our ‘outperform’ call on DRB-Hicom,” the research house said.
Water deal wrap-up before MB steps downThe federal government and Selangor Mentri Besar (MB) Tan Sri Abdul Khalid Ibrahim are rushing to sign an airtight agreement on the state’s water restructuring before he relinquishes his post.Abdul Khalid, who tendered his resignation to the Sultan of Selangor on Monday but was told to stay until his replacement is selected, has said that the water deal would be his legacy in Selangor.A memorandum of understanding was signed between the federal and state governments to facilitate the much-needed water restructuring on Aug 1, but both parties are busy working to ensure that a binding agreement is inked before Abdul Khalid steps down.Abdul Khalid said the two parties are in the final phase of formulating a legal agreement to incorporate the three water concessionaires who have agreed to the state’s initial takeover offer.“I’m meeting the (Minister of Energy, Green Technology and Water) Datuk Seri Dr Maximus Ongkili to discuss the final regulations regarding the remaining three concessionaires who have accepted the offer,” Abdul Khalid said at a media conference after chairing the weekly exco meeting in Shah Alam yesterday.The three water concessionaires are Puncak Niaga Sdn Bhd, Syarikat Bekalan Air Selangor Sdn Bhd and Konsortium Abass Sdn Bhd.Abdul Khalid said Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash), which has not accepted the offer, could face the Water Services Industry Act (WASIA) 2006 if it continues to refuse.“We are also discussing on the establishment of the steps involved in bringing in Splash to comply with WASIA,” he said, adding that the remaining processes will be conducted as soon as possible to ensure a conclusive takeover.On Aug 1, Abdul Khalid signed heads of agreement with the federal government to finalise the implementation of the water industry restructuring as well as the construction of the Langat 2 water treatment plant and distribution system project.Selangor has managed to cap the deal at RM9.6 billion, saving RM3 billion into the state’s coffer thus promises no water tariff hike for the people of Selangor for the next three years.Political analyst Dr Azmi Hassan said according to the state constitution, Abdul Khalid is still the legitimate MB and any legal documents that he signed are valid.“Until Abdul Khalid resigns or a vote of no confidence is called against him, Abdul Khalid is still the legitimate MB and it is not wrong for Abdul Khalid to sign agreements as the state’s MB,” Azmi told The Malaysian Reserve.The Universiti Teknologi Malaysia geostrategist also said it is ethically correct for Abdul Khalid to want to conclude the restructuring agreement before he leaves as the effort will benefit the Selangor people at large.“I don’t see any problem in Abdul Khalid’s rush into concluding the water deal legally as I value the effort as beneficial in the long term to the people of Selangor,” he said
LTH continue accumulate spree on Puncak, average accumulate 66% of total trading share from 28/8 to 3/9, increasing further its stake in Puncak from 6.24% to latest 7.03%
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