PETALING JAYA: The planned RM1bil investment by DRB-Hicom
Bhd to accelerate the development of Proton City in Tanjung Malim, Perak over
the next five years may be a move to consolidate Proton's manufacturing
activities in a single location, automotive analysts say.
They pointed out that news
reports had claimed that Proton's manufacturing land bank of 250 acres in Shah
Alam could have a gross development value of more than RM1bil.
“We think that a property
development play of the Shah Alam land bank would be a good move, as the value
of the Shah Alam real estate can be extracted to fund Proton's plans,” said an
analyst.
However, other analysts pointed
out that DRB-Hicom would need to look at issues such as the costs of moving the
production facilities from Shah Alam to Tanjung Malim as well as employees'
concerns.
“It would not be easy because
employees in Shah Alam are not keen on moving to Tanjung Malim. Also, would
DRB-Hicom want to incur the one-time costs and deal with the hassles of moving
all the equipment and facilities?” one analyst questioned.
Another analyst said the reported
planned RM1bil investment by DRB-Hicom was likely to be more of a property
development play in Proton City.
“Based on the news reports, this
is not just about investing in machines and vehicle production facilities.
Perak Mentri Besar Datuk Seri Dr Zambry Abdul Kadir had spoken about
infrastructure development in the area, including better road access to Proton
City from the North-South Expressway as well as building commercial areas and
schools,” he noted.
OSK Research said in a report
late last year that a potential sale of Proton's Shah Alam land bank could
fetch at least RM500mil. The research unit also pointed out that DRB-Hicom
could be keen on developing Proton's land bank in Shah Alam for its housing
development arm.
Automotive conglomerate DRB-Hicom
took over and privatised national carmaker Proton earlier this year.
Dr Zambry was recently reported
as saying the development of the 4,000-acre Proton City is set to be re-ignited
after slowing down since it started 15 years ago.
According to Dr Zambry, DRB-Hicom
plans to invest RM1bil in the next five years and make Tanjung Malim the main
Proton car manufacturing centre.
Dr Zambry said Tanjung Malim was
not fully developed as an automotive city, and only about 30% of the land had
been used.
According to the Proton City
website, the township consists of residential, commercial, institutional as
well as industrial parcels with seven lakes.
It is located about 5km north of
Tanjung Malim, and 90km from Kuala Lumpur.
Besides the RM1.8bil Proton car
assembly plant, it also houses Universiti Pendidikan Sultan Idris.
On its website, Proton says
Proton City is targeted to be fully developed by 2020, and aims to be home to
Malaysia's automobile industry.
However, some analysts say the
development of Proton City is not a major priority for DRB-Hicom which needs to
focus on rectifying the problems in the national carmaker and bringing it to
greater heights.
RHB Research analyst Alexander
Chia said DRB-Hicom's focus must be to fix issues at Proton.
Chia said Proton's vehicle
manufacturing plant in Tanjung Malim presently had a capacity utilisation rate
of between 40% and 50%.
“Without economies of scale,
Proton cannot make cars cheaply enough to compete. The development of Proton
City is a secondary objective.”
“DRB-Hicom needs to bring in a
technology partner. Volkswagen is a possibility. Such a deal has to be win-win
for all parties involved. Perhaps Volkswagen can use the extra capacity at
Proton's facility in Tanjung Malim as an assembly hub to expand its presence in
Asean,” said Chia.
The Proton plants in Tanjung
Malim and Shah Alam presently have an annual production capacity of 150,000 and
200,000 vehicle units respectively.
Last year the Tanjung Malim plant
produced 52,235 units while the Shah Alam facility produced 114,645 units.
However, the Proton plant in
Tanjung Malim can be expanded to have a maximum production capacity of up to
one million cars per year.
Meanwhile, HwangDBS Vickers
Research said in a recent report that Volkswagen's production capacity at
DRB-Hicom's Pekan plant would be progressively ramped up to 50,000 units by
2017 or 2018 to pave the way for exports to the Asean market.
“This will be for three variants,
Passat (rolled out), Jetta (early 2013) and Polo (second half of 2013) making
Malaysia Volkswagen's regional hub for passenger vehicles.”
It also noted that as the
Volkswagen Group owned other marques such as Audi, which DRB-Hicom is already
distributing in Malaysia, there is potential for similar tie-ups.
“This may help to absorb some
capacity at Tanjong Malim.”
The research unit said DRB-Hicom
was gearing up for regional expansion and was ready for the eventual saturation
of motor vehicle sales locally.
It also noted that with
DRB-Hicom's key executives now in Proton, the focus was on procurement to
ensure stringent quality control, to migrate the dealerships to a full
franchise to reduce costs, and launch a Perdana replacement model within 18
months to fill the void in the D-segment.
“Sales of Proton Preve (pic),
launched in April, have been encouraging with 11,310 bookings just two months
of launch.”
According to HwangDBS Vickers
Research, DRB-Hicom is still discussing with other automotive majors to take
strategic stakes in Tanjong Malim.
“We have assumed the acquisition
would be dilutive, leaving room for upgrades whenever there are synergies. For
now, earnings delivery is vital,” said the research unit.
Meanwhile, OSK Research said
recent news reports claiming Volkswagen was still keen on Proton was not
entirely surprising, given the former's quest to set up a manufacturing plant
catering for the Asean region.
“Proton's plant in Tanjung Malim
could be the best fit for Volkswagen in establishing its hub,” said OSK
Research.
It also pointed out that Proton's
performance in the second quarter of 2012 was dismal, with year-on-year vehicle
sales dropping by 6.4% to 37,753 units.
CIMB Research pointed out that
Volkswagen presently had less than 1% market share in Asean, which is in stark
contrast to its top position in China and in Europe, and its number three
position in the United States.
“Therefore, the DRB-Hicom and
Volkswagen partnership is essential in plugging the Asean gap in Volkswagen's
global market and helping it achieve its target of becoming the world's largest
auto manufacturer by 2018,” said CIMB Research.
The research unit also did not
rule out the possibility of Volkswagen's equity participation in Proton in the
future, going by the German carmaker's past partnership record when it took an
initial 30% equity stake in Skoda and a 19.9% stake in Suzuki.
THOMAS HUONG
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com
No comments:
Post a Comment