KUALA LUMPUR (May 30): Hong Leong Investment Bank Bhd (HLIB) lowered its target price (TP) for diversified DRB-Hicom Bhd shares to RM3 from RM3.30, but maintained its “buy” call on the stock.
In a note today, HLIB said it had downgraded DRB-Hicom after the group reported lower-than-expected core earnings for its financial year ended March 31, 2014 (FY14).
DRB-Hicom reported a lower net profit of RM456.8 million for FY14 compared to RM575.3 million in FY13. Revenue, however, rose to RM14.2 billion from RM13.13 billion.
HLIB said DRB-Hicom’s core earnings stood at RM208.9 million for the year, which was lower than HLIB’s and consensus forecast of RM296.1 million and RM303.5 million respectively.
The lower core earnings were attributed to higher selling and distributional costz for the automotive division, and weaker contribution from Bank Muamalat.
“We have cut FY15-16 earnings by 25.0% and 23.6% respectively, accounting for lower car sales volume and higher operating cost, lower contribution from Bank Muamalat and discontinued income from Uni.Asia Insurance,” said HLIB.
For FY17, HLIB introduced an earnings forecast of RM630 million for DRB-Hicom.
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