DRB-Hicom shares rise after Spirit Aerosystems Malaysia acquisition plan
The conglomerate rose 1.84%, or 1.5 sen, to 83 sen at 10.21 am, though it remains down about 25% year-to-date.
On Monday, DRB-Hicom said its wholly owned subsidiary, Composites Technology Research Malaysia Sdn Bhd (CTRM), had entered into a conditional share purchase agreement to acquire Spirit MY for a sum to be determined based on an enterprise value of US$95.2mil.
Hong Leong Investment Bank Research (HLIB Research) is positive on the acquisition, noting that Spirit MY's stable earnings are expected to complement CTRM's operations and enhance DRB-Hicom's overall financial performance.
'The indicative price-to-earnings (P/E) valuation stands at 7.0x, aligning closely with DRB's projected P/E of 7.4x for FY26 and 5.4x for FY27.
'The deal is expected to yield a negative goodwill gain of RM223.2mil, while CTRM will eliminate RM12.7mil in profits related to unsold inventory,' HLIB Research said.
'We anticipate an additional earnings contribution of around RM45mil per year - equivalent to approximately 21.5% of FY25 earnings and 15.4% of FY26 earnings,' it added.
While HLIB Research maintains a positive view on the acquisition, it is keeping its 'hold' recommendation with an unchanged target price of RM0.85, based on a 25% discount to its sum-of-the-parts valuation of RM1.11.
'We remain cautious on DRB's main business segment - automotive, given stiff market competition, while PosM and Deftech remain as drags to the group, partially offset by the steady contributors like Bank Muamalat and CTRM,' it said.
Kenanga Research described the acquisition as 'mildly positive,' noting that it should be price-to-earnings (P/E) accretive, with Spirit MY valued at 14 times compared with DRB-Hicom's 16 times.
The research house cautioned that there is currently a greater risk as Spirit MY no longer operates under the Spirit Group and, therefore, lacks cost-plus protection.
'We keep our earnings forecasts, target price of RM0.68 and underperform call, pending shareholders and regulators' approval,' it added.
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We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. USA News Group is a wholly-owned subsidiary of Market IQ Media Group, Inc. ('MIQ'). MIQ has been paid a fee for Oncolytics Biotech Inc. advertising and digital media from the company directly. There may be 3rd parties who may have shares of Oncolytics Biotech Inc., and may liquidate their shares which could have a negative effect on the price of the stock. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this publication as the basis for any investment decision. The owner/operator of MIQ own shares of Oncolytics Biotech Inc. which were purchased in the open market, and reserve the right to buy and sell, and will buy and sell shares of Oncolytics Biotech Inc. at any time without any further notice commencing immediately and ongoing. We also expect further compensation as an ongoing digital media effort to increase visibility for the company, no further notice will be given, but let this disclaimer serve as notice that all material, including this article, which is disseminated by MIQ has been approved by Oncolytics Biotech Inc.; this is a paid advertisement, we currently own shares of Oncolytics Biotech Inc. and will buy and sell shares of the company in the open market, or through private placements, and/or other investment vehicles. While all information is believed to be reliable, it is not guaranteed by us to be accurate. 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