KUALA LUMPUR: Hong Leong Investment Bank (HLIB) is maintaining its HOLD call on DRB-Hicom Bhd with an unchanged target price of 85 sen, reflecting a 25 per cent discount to its sum-of-the-parts (SOTP) valuation of RM1.11.
While HLIB views the group’s latest aerospace acquisition positively, it remains cautious on the automotive segment amid stiff competition, noting continued drag from Pos Malaysia Bhd and defence arm Deftech. These headwinds, however, are partially offset by stable contributions from Bank Muamalat and aerospace subsidiary Composites Technology Research Malaysia Sdn Bhd (CTRM).
CTRM has signed a conditional agreement to acquire Spirit AeroSystems Malaysia Sdn Bhd for US$95.2 million (RM446 million) from US-based Spirit AeroSystems, Inc. and Spirit AeroSystems International Holdings, Inc.
“We are positive with the acquisition, as Spirit AeroSystems Malaysia’s stable earnings are expected to complement CTRM’s operations and strengthen DRB-Hicom’s overall financial performance,” HLIB said in a note.
HLIB said the indicative price-to-earnings (P/E) multiple of 7.0x is in line with DRB-Hicom’s projected 7.4x for FY2026 and 5.4x for FY2027.
“The deal is expected to yield a negative goodwill gain of RM223.2 million, while CTRM will eliminate RM12.7 million in profits related to unsold inventory.”
The investment bank added that post-acquisition, annual earnings could rise by about RM45 million, equivalent to 21.5 per cent of FY2025 and 15.4 per cent of FY2026 earnings.
DRB-Hicom said the acquisition will give CTRM greater scale, technical capabilities, and supply chain leverage, enabling it to compete more aggressively in the global aerospace market while strengthening relationships with major OEMs, including Airbus (A220, A320, A350) and Boeing (737, 787).
Spirit AeroSystems Malaysia, based in Subang, produces advanced aerostructures and provides engineering, supply chain, and shared services for Airbus and Boeing programmes. For FY2024, it recorded a pre-tax profit of RM70.1 million and net assets of RM770.5 million.
With both Airbus and Boeing projecting rising aircraft deliveries this decade, DRB-Hicom believes the enlarged CTRM will be well-positioned to capture growing aerospace demand, diversify revenue streams, and boost operational efficiency.
© New Straits Times Press (M) Bhd
