“After the acquisition, the most important problem for Zhejiang Geely is to show round Proton,” analysts at Singapore-based UOB KayHian mentioned in a observe on Thursday. “Proton has suffered sustained losses, and it obtained 1.5 billion ringgit (US$338 million) in authorities support final 12 months given that it pursues a turnaround plan and seeks a international associate.”
The brokerage famous that it wasn’t the primary time Geely tried to enter the Malaysian market, beforehand making an attempt and failing to arrange a plant with an area associate.
“If Zhejiang Geely is unable to show Proton round in foreseeable future, Proton would turn out to be a burden,” UOB KayHian mentioned.
One other potential subject might come from Geely missing majority management of Proton.
Geely Holding, which additionally owns Sweden-based Volvo, will take a 49.9 % stake in Malaysia’s iconic, home-grown, however long-struggling carmaker Proton. Malaysian conglomerate DRB-Hicom will retain a 50.1 % stake.
The deal marked the end result of no less than a decade of makes an attempt to marry the politically delicate Proton with a international carmaker, with GM and Volkswagen each strolling away at completely different occasions.
In what may characterize the considerations over Proton, Citi, for one, famous that the deal would enhance the valuation of the vendor, elevating its goal worth for DRB-Hicom’s shares to 2.30 ringgit from 1.86 ringgit, maintaining a Purchase/Excessive Danger name on the inventory.
“Re-rating is imminent with the stake sale eradicating DRB’s largest overhang, in addition to a extra constructive outlook for Proton,” Citi mentioned in a observe late Wednesday.
Citi mentioned the goal enhance was to mirror the next implied valuation for DRB-Hicom’s remaining Proton stake, a authorities grant accompanying the deal and the sale of a 51 % stake in British sports-car model Lotus to Geely for round 556 million ringgit, which was additionally a part of the deal.