Proton Holdings was incorporated in 1983 and is based in Subang Jaya, Malaysia. Proton Holdings Berhad, an investment holding company, engages in the manufacture, assembly, and sale of motor vehicles and related products in Malaysia and internationally. The company also imports and distributes motor vehicles and related products, as well as manufactures automotive components. In addition, it involves in the property development and management operations, as well as provides engineering consultancy services.
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The objectives of this project are to perform common stock valuation on a major company listed on the Bursa Malaysia and our group had decided to choose Proton Holdings as mentioned the detail above. We also have to estimate the intrinsic value of the company's common stock using the general approaches such as Price/Earnings Ratio, Price/Cash Flow Ratio, Price/Book Value Ratio and Price/ Sales Ratio. From the various values that we estimated using the methods above, we have to find a single value that most appropriate as company's common stock price and compare it with the current market price and then determine whether the stock is overvalued, undervalued or correctly priced. Based on the valuation, we also have to appropriate recommendation to investors (Buy/Sell/Hold).
HISTORY OF PROTON
It was established in 1983 under the direction of the former Prime Minister, Dr. Mahathir Mohamad. Since then, it was Malaysia's dominant carmaker until the establishment of Perodua in 1993. Based on technology and parts from Mitsubishi Motors, production of the first model, the Proton Saga began in September 1985 at its first manufacturing plant in Shah Alam, Selangor. Initially the components of the car were entirely manufactured by Mitsubishi but slowly local parts were being used as technologies were transferred and skills were gained. The 100,00th Proton Saga was produced in January 1989.
Until the end of the 1990s, the car's logo featured the crest from Malaysia's coat of arms, featuring a crescent and a fourteen-pointed star. The new Proton logo features a stylized tiger head, as well as the change from the lowercase italic text "proton" to uppercase "PROTON".
In 1993, a model called Proton Wira was introduced based on the Mitsubishi Lancer/Colt. More than 220,000 units were sold between 1996 and 1998. Proton Perdana, based on the Mitsubishi Galant/Eterna, was first produced in 1995, intended for higher end market. The Proton Waja (Proton Impian in UK), which launched early 2001, is the first car model designed internally by Proton. By 2002 Proton held a market share of over 60% in Malaysia, which was reduced to barely 30% by 2005 and is expected to reduce further in 2008 when AFTA mandates reduce import tariffs to a maximum of 5%.
With the acquisition of Lotus technologies in 1996 from ACBN Holdings (a company owned by the owner of Bugatti), Proton has gained an additional source of engineering and automotive expertise. This led to the production of Proton Gen-2 which was code name Wira Replacement Model (WRM) before the launch. The Gen-2 is the first of cars to be manufactured and assembled at the new manufacturing plant in Tanjung Malim, Perak which is part of Proton City development project. The plant was opened in 2004. On 8 June 2005 Proton introduced the second model to be manufactured in Tanjung Malim, the 1,200 cc 5-door supermini, the Proton Savvy. Both the Gen-2 and Savvy, were models that MG Rover was looking to rebadge when the
2
British firm entered into collaboration talks with Proton. However these joint-venture talks were unsuccessful and MG Rover subsequently collapsed.
In 2007, Proton launch its new sedan as replacement version for Wira Sedan but with new name, Persona, which was previously used as an export name for models outside Malaysia. The new Proton Saga replacement model (codename Proton BLM) was launched on 18 January 2008. The new Saga is based on the Savvy platform, but using Campro 1.3L instead of Renault engine. It was announced on August 8, 2008 that Proton is developing a new, fuel-efficient hybrid car to beat rising costs and address environmental concerns. Prime Minister Abdullah Ahmad Badawi told reporters that he had already test-driven the car and urged the company to continue researching energy-saving techonologies.In addition, Proton has entered talks with Mitsubishi Motors once again, and talks are going positive. This includes the Waja replacement based on the Mitsubishi Lancer and the rebadging of Proton Persona and Proton Exora as Mitsubishi vehicles in certain markets.
As of 3 August 2008, Proton has produced 3 million cars since 1985, where the 3 millionth car is a second-generation Saga.
3
PROFILE OF PROTON
PROTON was incorporated on 7 May 1983 with three primary national policy objectives: To spearhead the automotive industrialisation process and
manufacturing industries; To acquire/upgrade technology and industrial skills within the
automotive manufacturing industry; and to strengthen the international competitiveness of Malaysia's industrial capability.
PROTON commands a substantial share of the domestic market for passenger cars andover the years has been building up distribution networks in key market centres across the
four regions, South-East Asia, the Middle East, United Kingdom / Western Europe, and Australasia.
The main business activities of the Group encompass vehicle engineering, research & development, manufacturing, distribution and after-sales services. The Group is also involved
in financial services and property management in supporting the main business activities. The Group designs and produces cars for diverse consumer preferences. The portfolio of PROTON models includes the reliable family-sedan Waja, the stylish Gen.2, the elegant Perdana V6, the versatile Arena, the proven Saga range, the fun-to-drive Savvy, the desirable sporty Satria Neo and the '2008 Best Model of the Year' winner, the Persona. The Group also has in its portfolio, the world-renowned Lotus sports cars, with models such as Elise, Esprit, Exige, Europa and the recently Exora to suit a range of customer demands and preferences. The Group conducts research in its centres in Malaysia and the United Kingdom on new technologies to create cars that are unique in both design and driving performance. Through Lotus, the Group provides comprehensive and versatile consultancy services to many of the world's OEMs and Tier 1 suppliers.
4
Currently, the Group has almost 12,000 employees who are involved in the whole value chain of the business, from research, design, development, testing, stamping, casting,machining and assembly to marketing, distribution and after-sales services. Strong customer orientation and competitively priced products are the foundation of our business and essential to our success. We aim to maintain market leadership by continuing to develop innovative products and satisfy our customers needs better and enhance profitability.
FINANCIAL PERFORMANCE
The markedly improved market condition during the first half of the year under review saw an improvement in terms of sales and revenue for PROTON. With sales increase of 9%, our revenue was positively impacted with an increase of 15% compared to 2008. Nevertheless, Proton are mindful of the challenges to be faced in the next financial year and
beyond. The gloomier second half of the year under review was a reflection and clear
indication of the foreseeable future, which will be tough in light of the financial crisis which is greatly impacting the global automotive industry. In light of this, the immediate and prime concern is to reinforce PROTON's foundation and strengthen its balance sheet in order to confidently strive forward and overcome obstacles in order to focus on and aggressively enhance our export programme.
Accordingly, for the financial year ended 31 March 2009, PROTON recorded a loss after tax of RM301.8 million albeit on the back of improved revenue of RM6.5 billion. This decline was largely due to the one-off exceptional provision for the impairment of property, plant and equipment and inventory write-down for certain models impacted by declining demand. Additionally, PROTON's financial performance for the second half of the financial year was also adversely affected by the accelerated amortisation of dies and jigs for certain models as well as higher commodity prices, increased costs of components and raw materials which arose from higher foreign currency exchange rates, particularly, the Japanese Yen and the US Dollar, coupled with allowance for doubtful debts.
5
On a more positive note, the Group's cash and cash equivalents as at 31 March 2009 was maintained close to the RM1 billion mark. This was after taking into account the various
research and development (R&D) expenditure undertaken during the financial year to develop its recently launched first home grown multi-purpose vehicle, the Exora; initiatives to take their successful Saga and Persona models into international markets; launch of product refreshers, namely the Persona SE and Satria Neo CPS; and commitment for powertrain development, further product refreshers, as well as new product introduction.
In addition, PROTON has received an R&D grant from the Government amounting toRM81 million, under the National Automotive Policy (NAP), in recognition of the Group's
investment in R&D amounting to RM162 million.
SWOT ANALYSIS
Data monitor's Proton Holdings Berhad - SWOT Analysis company profile is the essential source for top-level company data and information. Proton Holdings Berhad - SWOT Analysis examines the company's key business structure and operations, history and products, and provides summary analysis of its key revenue lines and strategy.
Proton Holdings (Proton) designs and produces cars for diverse consumer markets. The portfolio of Proton models includes the Waja, the Gen.2, the Arena/Jumbuck, the Savvy, and the Satria Neo. It is headquartered in Shah Alam, and employs about 11,000 people. The company recorded revenues of MYR7, 796.9 million (approximately $2,115.2 million) during the financial year ended March 2006 (FY2006), a decrease of 8.1% over 2005. The net profit was MYR4, 908.7 million (approximately $1,331.7 million) in 2006, a decrease of 0.2% from 2005. the company recorded revenues or MYR6,486.6 million ($1,901million) during the financial year ended March (FY2009), an increase of 15% over FY2008. The net profit loss was MYR301.8 million ($88.4 milion) in FY 2009, as compared to net profit of MYR 184.6 million
( 54.1 million) in FY2008.
6
Furthermore, a major scope of the report is to provide all the crucial information on Proton Holdings Berhad required for business and competitor intelligence needs. It's also to contain a study of the major internal and external factors affecting Proton Holdings Berhad in the form of a SWOT analysis as well as a breakdown and examination of leading product revenue streams of Proton Holdings Berhad. Besides that, data is supplemented with details on Proton Holdings Berhad history, key executives, business description, locations and subsidiaries as well as a list of products and services and the latest available statement from Proton Holdings Berhad.
ECONOMIC ANALYSIS
Malaysia economy outlook for 2009 will bound to be a very challenging year for Malaysia, although Malaysia economy is holding up pretty well. The first half of 2009 is expected to be a very tough period for Malaysia. As a conclusion, the impact on Malaysia this year has somehow been cushioned but many are beginning to feel the economic downturn towards the year-end.
GDP of Malaysia was contracted by a steep 6.2% year on year in the first quarter of 2009. The economy is particularly sensitive to changes in world trade such as exports and imports of goods and services that are equivalent to more than 100% of GDP. The output decline eased to 3.9% in the second quarter. During the first 6 months of this year, the economy contracted by 5.1% in a broad based downturn that saw weakness spread from exports to investment and private consumption. There is only a decline in imports and increased government consumption provided some offset. Exports in volume terms fell by 16.3% in the first half of 2009 from the prior-year period reflecting dwindling demand from most of Malaysia's important export markets. This was offset by a 21.5% fall in import volumes and thus net exports registered growth for the period. Fixed investment contracted by 10.3%, a sign that many firms deferred or canceled proposed investments seeking to safeguard their balance sheets. Whereby, the private consumption which accounts for around one half of GDP had declined by 0.1% on account of a fall in disposable incomes in several sectors of the economy.
7
Besides that, the more moderate pace of GDP contraction during the second quarter owed much to increased public expenditure and growth in private consumption. Public consumption rose by 1.0% in the quarter as the Government implemented two fiscal stimulus packages. The first drawn up in November 2008 and a second, larger set of measures in March 2009. The higher public spending together with some stabilization in the labor market and lower
consumer prices improved consumer sentiment and led to a 0.5% increase in private consumption after a decline of 0.7% in the first quarter.
Meanwhile, the inflation has decelerated sharply from a peak of 8.5% in July-August 2008, so that the consumer price index rose by just 1.7% in the first 7 months of 2009. Indeed, the index declined by 2.4% from its year-earlier levels in July 2009 due to falling global commodity prices, slower domestic demand and the base effect of an increase in administered fuel prices in June 2008. However, on a month on- month basis consumer prices edged up by 0.1% in July, suggesting an easing in deflation pressures.
In response to the deteriorating domestic economy and slowing inflation, Bank Negara Malaysia the central bank, reduced its policy interest rate in steps from 3.5% at the beginning of November 2008 to 2.0% in February 2009 and its reserve ratio for commercial banks to a record low of 1.0% from 3.5% in November 2008. A trade-weighted depreciation of the currency has further relaxed financial conditions. The monetary authorities said in July that the easing of monetary policy, coupled with the two fiscal stimulus packages, are sufficient to support economic activity.
Monetary Policy
Prior to the 1997 Asian Financial Crisis, the Malaysian ringgit was an internationalized currency, which was freely traded around the world. Just before the crisis, the Ringgit was traded RM2.50 at the dollar. Due to speculative activities, the Ringgit fell as much as RM4.10 to the dollar in matter of weeks. Bank Negara Malaysia, the nation's central banks decided to impose capital controls to prevent the outflow of the Ringgit in the open market. The fixed change rate was abandoned to floating exchange rate in July 2005. At this point, the Ringgit is still not 8
internationalized. The Ringgit continue to strengthen to 3.18 to the dollar in March 2008. Meanwhile, many aspect of the capital control has been slowly relaxed by Bank Negara Malaysia. However, the government continues to not internalized the Ringgit. The government stated that the Ringgit will be internationalized once it is ready.
Monetary policy in Malaysia was indicate by Overnight Policy Rate (OPR) based on the current 3.5%, inter bank rate, plus or minus 0.25% will used as the main basis of BLR computation. Further, the OPR will be the indicator of the monetary policy stance. While, BLR is determined by bank itself and it will attracts investors to invest in any projects in Malaysia.
MALAYSIA: SECTORAL FORECASTS 2009
SectorGrowth (%)
Agriculture 3.3
Mining 2.7
Manufacturing 3.0
Construction 0.0
Services 4.7
Real GDP 4.0
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RELATIVE VALUATION TECHNIQUES
a) Year Ended 31 March 2009
Stock price =1.58
1)Price / Earning Ratio
Price / Earning Ratio =
=
= 2.88
It stock (1.58) was trading at 2.88 times the company basic net earning of 0.54 per share. This mean that Proton Holding would be paying RM2.88 for every ringgit of Proton earnings.
2)Price / Cash Flow Ratio
Price / Cash Flow Ratio =
=
= 3.92
It stock (1.58) was trading at 3.92 times the company cash flow of 0.40 per share.
3)Price / Book Value Ratio
Price / Book Value Ratio =
=
= 0.17
It stock (1.58) was trading at 0.17 times, the company book value of 9.29 per share.
10
4)Price / Sales Ratio
Price / Sales Ratio =
=
= 0.13
It stock (1.58) was trading at 0.13 times, the company sales of 11.81 per share. This means that investor would paying RM 0.13 for every ringgit of Proton Holding sales.
b) Year Ended 31 March 2008
Stock price =3.76
1)Price / Earning Ratio
Price / Earning Ratio =
=
=3.50
2)Price / Cash Flow Ratio
Price / Cash Flow Ratio =
=
= 2.44
11
3)Price / Book Value Ratio
Price / Book Value Ratio =
=
= 0.38
4)Price / Sales Ratio
Price / Sales Ratio =
=
= 0.36
c) Year Ended 31 March 2007
Stock price =6.47
1)Price / Earning Ratio
Price / Earning Ratio =
=
=19.25
12
2)Price / Cash Flow Ratio
Price / Cash Flow Ratio =
=
= 36.78
3)Price / Book Value Ratio
Price / Book Value Ratio =
=
= 0.67
4)Price / Sales Ratio
Price / Sales Ratio =
=
= 0.75
2009
2008
2007
Price / earning ratio
2.88
3.50
19.25
Price/ cash flow ratio
3.92
2.44
36.78
Price/book value ratio
0.17
0.38
0.67
Price/sales ratio
0.13
0.36
0.75
13
PROTON
KLSE
Date
Adj Close
Return
ks-k bars
(ks-k bars)2
Date
Adj Close
Return
km-k barm
(km-k barm)2
(ks-k bars)(kM-k barM)
1
12/28/2009
3.91
12/28/2009
1272.78
2
12/21/2009
3.96
0.00552
0.00422
0.0000178
12/21/2009
1263.94
-0.00303
-0.00248
0.0000061
-0.00001045537
3
12/14/2009
3.83
-0.01450
-0.01580
0.0002495
12/14/2009
1266.97
0.00104
0.00159
0.0000025
-0.00002509608
4
12/7/2009
3.9
0.00787
0.00657
0.0000431
12/7/2009
1260
-0.00240
-0.00185
0.0000034
-0.00001212782
5
11/30/2009
4.03
0.01424
0.01294
0.0001675
11/30/2009
1270.2
0.00350
0.00405
0.0000164
0.00005241918
6
11/23/2009
4.1
0.00748
0.00618
0.0000382
11/23/2009
1270.61
0.00014
0.00069
0.0000005
0.00000425849
7
11/16/2009
3.68
-0.04694
-0.04824
0.0023266
11/16/2009
1274.36
0.00128
0.00183
0.0000033
-0.00008821257
8
11/9/2009
3.72
0.00470
0.00340
0.0000115
11/9/2009
1270.96
-0.00116
-0.00061
0.0000004
-0.00000207604
9
11/2/2009
3.7
-0.00234
-0.00364
0.0000133
11/2/2009
1260.76
-0.00350
-0.00295
0.0000087
0.00001074067
10
10/26/2009
3.79
0.01044
0.00914
0.0000835
10/26/2009
1243.23
-0.00608
-0.00553
0.0000306
-0.00005055381
11
10/19/2009
4.06
0.02989
0.02859
0.0008173
10/19/2009
1267.1
0.00826
0.00881
0.0000776
0.00025181119
12
10/12/2009
4.02
-0.00430
-0.00560
0.0000313
10/12/2009
1256.77
-0.00356
-0.00301
0.0000090
0.00001683148
13
10/5/2009
4
-0.00217
-0.00347
0.0000120
10/5/2009
1233.82
-0.00800
-0.00746
0.0000556
0.00002583260
14
9/28/2009
3.94
-0.00656
-0.00786
0.0000618
9/28/2009
1206.25
-0.00981
-0.00927
0.0000859
0.00007285324
15
9/23/2009
4.22
0.02982
0.02852
0.0008132
9/22/2009
1217.39
0.00399
0.00454
0.0000206
0.00012950639
16
9/14/2009
4.44
0.02207
0.02077
0.0004315
9/14/2009
1221.2
0.00136
0.00191
0.0000036
0.00003959060
17
9/7/2009
3.75
-0.07335
-0.07465
0.0055727
9/7/2009
1208.28
-0.00462
-0.00407
0.0000166
0.00030384841
18
9/1/2009
3.17
-0.07297
-0.07427
0.0055162
9/1/2009
1178.74
-0.01075
-0.01020
0.0001041
0.00075761101
19
8/24/2009
3.05
-0.01676
-0.01806
0.0003261
8/24/2009
1174.27
-0.00165
-0.00110
0.0000012
0.00001988441
20
8/17/2009
2.98
-0.01008
-0.01138
0.0001296
8/17/2009
1163.79
-0.00389
-0.00334
0.0000112
0.00003806807
21
8/10/2009
2.96
-0.00292
-0.00422
0.0000178
8/10/2009
1188.57
0.00915
0.00970
0.0000941
-0.00004096508
22
8/3/2009
2.92
-0.00591
-0.00721
0.0000520
8/3/2009
1184.88
-0.00135
-0.00080
0.0000006
0.00000577680
23
7/27/2009
2.72
-0.03081
-0.03211
0.0010312
7/27/2009
1174.9
-0.00367
-0.00312
0.0000098
0.00010033777
24
7/20/2009
2.67
-0.00806
-0.00936
0.0000875
7/20/2009
1155.88
-0.00709
-0.00654
0.0000428
0.00006118539
25
7/13/2009
2.69
0.00324
0.00194
0.0000038
7/13/2009
1120.9
-0.01335
-0.01280
0.0001638
-0.00002485126
26
7/6/2009
2.69
0.00000
-0.00130
0.0000017
7/6/2009
1067.76
-0.02109
-0.02054
0.0004221
0.00002668803
27
6/29/2009
2.69
0.00000
-0.00130
0.0000017
6/29/2009
1072.69
0.00200
0.00255
0.0000065
-0.00000331196
28
6/22/2009
2.77
0.01273
0.01143
0.0001306
6/22/2009
1075.77
0.00125
0.00179
0.0000032
0.00002050422
29
6/15/2009
2.65
-0.01923
-0.02053
0.0004216
6/15/2009
1059.5
-0.00662
-0.00607
0.0000368
0.00012462522
30
6/8/2009
2.82
0.02700
0.02570
0.0006607
6/8/2009
1090.15
0.01239
0.01293
0.0001673
0.00033246412
31
6/1/2009
2.89
0.01065
0.00935
0.0000874
6/1/2009
1075.5
-0.00588
-0.00533
0.0000284
-0.00004980485
32
5/25/2009
2.98
0.01332
0.01202
0.0001445
5/25/2009
1044.11
-0.01286
-0.01232
0.0001517
-0.00014802117
33
5/18/2009
2.88
-0.01482
-0.01612
0.0002599
5/18/2009
1045.26
0.00048
0.00103
0.0000011
-0.00001655844
34
5/11/2009
2.8
-0.01223
-0.01353
0.0001832
5/11/2009
1014.21
-0.01310
-0.01255
0.0001574
0.00016981166
35
5/4/2009
2.89
0.01374
0.01244
0.0001548
5/4/2009
1026.78
0.00535
0.00590
0.0000348
0.00007338128
36
4/27/2009
2.96
0.01039
0.00909
0.0000827
4/27/2009
990.74
-0.01552
-0.01497
0.0002241
-0.00013613817
37
4/20/2009
3.06
0.01443
0.01313
0.0001724
4/20/2009
992.68
0.00085
0.00140
0.0000020
0.00001836346
38
4/13/2009
2.65
-0.06248
-0.06377
0.0040672
4/13/2009
965.17
-0.01221
-0.01166
0.0001359
0.00074338959
39
4/6/2009
1.99
-0.12439
-0.12569
0.0157984
4/6/2009
941.38
-0.01084
-0.01029
0.0001059
0.00129335708
40
3/30/2009
1.84
-0.03404
-0.03533
0.0012485
3/30/2009
907.01
-0.01615
-0.01560
0.0002435
0.00055135466
41
3/23/2009
1.55
-0.07449
-0.07579
0.0057434
3/23/2009
885.43
-0.01046
-0.00991
0.0000982
0.00075094770
42
3/16/2009
1.57
0.00557
0.00427
0.0000182
3/16/2009
856.82
-0.01426
-0.01372
0.0001881
-0.00005855100
43
3/10/2009
1.55
-0.00557
-0.00687
0.0000472
3/10/2009
843.45
-0.00683
-0.00628
0.0000395
0.00004313378
44
3/2/2009
1.6
0.01379
0.01249
0.0001560
3/2/2009
858.22
0.00754
0.00809
0.0000654
0.00010101582
45
2/23/2009
1.77
0.04385
0.04255
0.0018109
2/23/2009
890.67
0.01612
0.01667
0.0002778
0.00070925722
46
2/16/2009
1.75
-0.00494
-0.00623
0.0000389
2/16/2009
889.71
-0.00047
0.00008
0.0000000
-0.00000050242
47
2/10/2009
1.74
-0.00249
-0.00379
0.0000143
2/10/2009
909.84
0.00972
0.01027
0.0001054
-0.00003888416
48
2/3/2009
1.74
0.00000
-0.00130
0.0000017
2/3/2009
896.64
-0.00635
-0.00580
0.0000336
0.00000753185
49
1/28/2009
1.72
-0.00502
-0.00632
0.0000399
1/28/2009
884.45
-0.00594
-0.00540
0.0000291
0.00003410116
50
1/19/2009
1.75
0.00751
0.00621
0.0000386
1/19/2009
872.69
-0.00581
-0.00526
0.0000277
-0.00003269448
51
1/12/2009
1.92
0.04026
0.03896
0.0015182
1/12/2009
896.47
0.01168
0.01222
0.0001494
0.00047632497
52
1/5/2009
1.93
0.00226
0.00096
0.0000009
1/5/2009
919.07
0.01081
0.01136
0.0001291
0.00001087357
53
12/30/2008
1.84
-0.02074
-0.02204
0.0004857
12/30/2008
894.36
-0.01184
-0.01129
0.0001274
0.00024875512
54
12/22/2008
1.83
-0.00237
-0.00367
0.0000134
12/22/2008
867.35
-0.01332
-0.01277
0.0
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