Proton Holdings - UNDERPERFORM - 12 March 2012

We did a test-drive of Proton’s upcoming new C segment sedan codenamed P321A last Friday. This new replacement model, which is expected to be launched next month, will be priced slightly higher than the existing Persona model. Although the price of the P321A is slightly more expensive, its new features such as 1.6L turbo engine, stronger body frame via HPF, paddle shifter and others are still  likely appeal to both family and young car buyers alike in our view. We actually expect better sales for Proton from the P321A, what with its enhanced features above. That  said, we are still recommending an “Accept Offer @ RM5.50” (with implied PNTA of 0.9x) for the stock based on  our Target Price of just RM3.11 (0.5x P/NTA FY12 NTA/share). Our UNDERPERFORM call is also retained. 

P321A test drive.  We test drove the upcoming new C segment sedan codenamed P321A, which will replace the Proton Persona, last Friday. The new model is expected to be launched in April 2012 and will be priced slightly higher than the existing Persona model. We understand that it is a family sedan, targeting married male in the late 20s to 40s who are looking for an additional car and a replacement car, as well as targeting medium to high household income of RM5,000 to RM8,000 per month. In addition, Proton is also targeting single young professionals or executives who prefer sporty and performance cars with the P321A.

The features.  The P321A has an enhanced safety feature with four airbags. Apart from that, its body frame has also been strengthened via a process called Hot Press Forming  (HPF). This new high technology process is the first in Malaysia and South East Asia. The car can withstand a force of 1,500 mega Pascal. On the engine part, it comes with a 1.6L Charged Fuel Efficiency (CFE) engine, which can be turbocharged to match 1.8L to  2.0L performance. Together with the engine, it has the Continuous Variable Transmission (CVT) technology which allows the car to change gear ratios seamlessly, eliminating transmission shock and facilitating a greater responsiveness and a smooth consistent power delivery. The car also offers three driving modes namely economy mode, sport mode and SAT mode to suit the driver’s preference and feel. 

Worth buying? Although the price of the P321A is slightly more expensive, its new features such as the 1.6L turbo engine, stronger body frame via HPF, shift lever with tiptronicmode and paddle shifteras well as its spacious 508L boot space that can normally be found in higher range cars. Therefore, it is likely to appeal to both family and young car buyers alike in our view. We,in fact, expect better sales for Proton from the P321A with its new enhanced features and we believe its lower price tag comparatively may hive off some market shares from its fellow competitors in the segment (such as Vios and City). 

Valuation. We are, however, maintaining our earnings, and target price of RM3.11 for Proton based on a historical PNTA of 0.5x on its FY12 NTA/share. Our UNDERPERFORM recommendation on Proton is also maintained. Until further clarity unfolds via the offer document (no tentative date as yet), our current recommendation for investors for the stock is still to “Accept Offer @ RM5.50” (with implied PNTA of 0.9x) based on our lower target price and UNDERPERFORM call above.

Source: Kenanga