May 26, 2017 10:34 pm JST

Mahathir laments Proton sale amid positive sentiment

Analysts lift targets as Malaysia's national car saga ends

CK TAN, Nikkei staff writer

Former Prime Minister Mahathir Mohamad’s has been left weeping over the sale of his Malaysian national car project to a Chinese auto company. © Reuters

KUALA LUMPUR -- Former Prime Minister Mahathir Mohamad says he has shed tears over the sale to China of nearly half Proton Holdings, the Malaysian national carmaker that he founded in 1983.   

"I am sad," he wrote in a blog on Thursday. "Proton can no longer be national."

Investors welcomed the much-anticipated sale which could lead to domestic recovery and possibly a return to exports.  

Proton's parent, DRB-Hicom, signed with China's Zhejiang Geely Holding Group on Wednesday to sell 49.9% of the company for an estimated 770 million ringgit ($180 million).

My child is lost
Former Prime Minister Mahathir Mohamad

Shares of DRB-Hicom have more than doubled in the past year after the government instructed the troubled auto conglomerate to find a lifeboat foreign investor for its failing subsidiary.

Shares have risen 48% year to date, and closed at 1.65 ringgit on Friday, while the benchmark FTSE Bursa Malaysia KLCI was up 8.4% in the same period.  

On Thursday, RHB Research and PublicInvest Research raised the target price for DRB-Hicom to 2.77 ringgit and 1.82 ringgit respectively in expectation of the Geely purchase improving Proton's turnover. The Chinese carmaker is known for affordable sports utility vehicles and acquired Sweden's Volvo Cars in 2010.

Mahathir retained his strong influence at Proton even after his retirement from politics in 2003, and continued to advise the company until March last year.

Proton's domestic market share had slipped from a peak of over 70% in 1993 to 12.5% in 2016.

A number of previous attempts to revive Proton failed, the last of which was the 2012 privatization by DRB-Hicom. Talks with Germany's Volkswagen reportedly broke down after Mahathir intervened in 2007.

A government float followed Mahathir's departure as advisor after he had a major falling out with Prime Minister Najib Razak.

Geely is also acquiring a 51% stake in Lotus, the British sports carmaker that Proton bought in 1996 to boost engineering standards. Lotus has not been profitable despite cash injections from DRB-Hicom and previous owners.

"I cry even if Malaysians are dry-eyed," Mahathir said. "My child is lost."

Asia300

DRB-Hicom Bhd.

Malaysia

Market(Ticker): KLS(1619)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 767.51M
Shares: 1,933.23M

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