DRBHCOM above $2.60 by 31-Aug-2011

  • target price: $2.60 ( 16.07 % in 98 days)
  • price when predicted: $2.24
  • current price: $1.70
  • 2241 days pass target date.
DRB-Hicom have been moving under investor radar due to its legacy. I believe it’s a silent counter with huge potential to investors who believes in her.

DRB is now operating under 4 main segments; Automotive, Services, Investment Holding & Property Infrastructure all with strong growth potential as well as a high degree of earnings resilience. DRB-Hicom has solid financials with significant balance sheet capacity to fund new businesses. NTA stands at RM2.54.

Catalyst :
1) Recent acquisition of 32.2% stake in POS Malaysia.
2) Its wholly-owned subsidiary, DEFTECH had accepted the Letter of Award dated 23 February 2011 from the Government of Malaysia to design, develop, manufacture, commission, supply and delivery of two hundred and fifty seven (257) units of twelve (12) variants of the 8 x 8 Armoured Wheeled Vehicles (AWV) (“Contract”). The Contract valued at RM7.55 billion is for a period of 7 years commencing from 2011.
3) Merger of Bank Muamalat
4) Re-zoning of POS Malaysia lands to commercial.

So far 3Q YTD 31.12.2010:
Revenue = RM4,806mil
PBT=RM567mil
PAT=RM480mil
EPS=RM0.207

Guesstimate for Q4:
Expected Revenue : RM1,800mil
Expected PBT:RM183mil
Expected PAT:RM155mil

Hence, YTD 31.03.2011
Revenue = RM6,606mil (y.o.y +5%)
PBT=RM750mil (y.o.y +14%)
PAT=RM635mil (y.o.y +17%)
EPS=RM0.328 (y.o.y +34%)

PEG=0.52 (undervalued !)

At RM2.24 based on guesstimate FYE 31.03.2011, EPS of RM0.328; PE=6.8X !! Taking a prudent industry PE of 8X – 10X, potential for DRB-Hicom TP is RM2.62 to RM3.28.


Cheers.

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I Think So

Not Likely

Comments

EPF and some big buyers have been accumulating the shares recently. Once the big sellers are finished/absorbed, this counter can start to surge up.
IMHO it's unlikely to move up in the short-term due to a less favourable quarterly announcement (qoq dropped from 13.41 to 3.75), although a interim dividend of 4cents is proposed which keep them price propped at around this level. Furthermore, the merger between Bank Muamalat and BIMB is off, from what I heard. From the technical side, the price has moved below its MA, but I'd expect the price to hover around this level for some time.

For the long-term it can be a good counter to hold, assuming the market is still good.
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