Our website is made possible by displaying online advertisements to our visitors.
Please consider supporting us by disabling your ad blocker.

Newsbreak: DRB-Hicom, Sime Darby front runners for government fleet contract

TheEdge Mon, Apr 22, 2019 05:00pm - 5 months ago


DRB-Hicom Bhd and Sime Darby Bhd are the front runners in the bid for the supply, repair, maintenance and management of the government’s vehicle fleet for a concession period of 15 years, according to sources familiar with the tender.

The request for proposal for the contract closed on Feb 28 and the government is currently evaluating the submissions, say the sources. Apart from DRB-Hicom and Sime Darby, three other companies — Naza Group, Samling Group and Spanco Sdn Bhd — also submitted proposals.

“More than 20 companies attended the tender briefing, with 10 buying the documents. Only five submitted the proposals, including the previous concessionaire, Spanco,” a source with knowledge of the tendering process tells The Edge.

“DRB-Hicom is still the largest shareholder of Proton, which makes up most of the vehicle types required by the government, while Sime Darby has an edge because of its good maintenance services,” says another source.

The two companies also have car rental and leasing businesses. DRB-Hicom’s EZ-Drive Sdn Bhd is the Avis Rent-a-Car licensee in Malaysia while Sime Darby’s Rent A Car Sdn Bhd is the licensee for Hertz International.

According to the sources, the government currently has a fleet of 12,500 saloon cars. The new concession will require the winning bidder to supply 10,000 to 16,000 saloon cars over the next five years, which will have to be replaced every five years.

The models required include Toyota Vellfire and Honda Accord for the use of ministers and high-ranking officials, as well as Toyota Altis and Proton’s X70, Persona and Saga for departmental use and as patrol vehicles, the sources say.

A check on UMW Toyota Motor Sdn Bhd’s website shows that the Toyota Vellfire costs RM362,000 on the road without insurance. However, it is expected that a bulk purchase will entitle the buyer to discounts, especially when the vehicles are going to be used by the government.

One of the sources says the government requires up to 32 Vellfires, 420 Honda Accord 2.4 variants and almost 3,000 Honda Accord 2.0 variants. The Honda Accord 2.4 costs RM168,998 per unit while the lower capacity variant costs RM148,512 each.

It is not known how much the government has budgeted for the fleet supply, management, repair and maintenance contract.

According to Spanco’s website, it claims that it is the nation’s leading fleet management service provider, having had 25 years of experience in delivering total fleet management solutions.

However, a check on the Companies Commission of Malaysia’s website reveals that Spanco is an exempt private company. This means its financials are not available for public consumption. Spanco has delivered and managed over 35,000 vehicles for the government over the last 25 years, according to its website.

Nevertheless, its wholly-owned subsidiary, Spanco Services Sdn Bhd, which provides repair and maintenance services for vehicles, registered a profit after tax of RM5.4 million on revenue of RM106.14 million in the financial year ended Dec 31, 2017 (FY2017).

Spanco’s shareholders are Datuk Osman Mohd Zain with a 25.5% stake, Jati Rata Sdn Bhd (25.5%), Tan Sri Robert Tan Hua Choon (24.65%), Datuk Seri Tan Han Chuan (14.67%) and Datin Tan Ching Ching (9.68%).

Robert, known as the “Casio King” for his rise to fame and fortune distributing the brand’s watches and calculators, is the largest shareholder of JKG Land Bhd with a 10.77% stake, Marco Holdings Bhd (19.7%), Jasa Kita Bhd (31.89%), FCW Holdings Bhd (25.35%) and GPA Holdings Bhd (23.69%).

Meanwhile, Samling Group is one of the largest timber concessionaires in Malaysia. As at 2016, the group had about 1.3 million ha of forest concessions, mainly in Sarawak, and 1.6 million ha in Guyana. The group produced 2.3 million cu m of logs during the year.

The group, owned by Tan Sri Dr Yaw Teck Seng and his sons, has diversified into property development, oil palm plantations, quarry and rubber products as well as automotive distribution through its public listed and non-listed subsidiaries.

Samling is an authorised dealer for Mitsubishi Motors Malaysia Sdn Bhd and Honda Malaysia Sdn Bhd. It has a sales, spare parts and service centre for Mitsubishi Malaysia in Miri and runs the largest such centre for Honda Malaysia in Sungai Buloh.

Meanwhile, the Yaw family is reported to have interests in StarChase, a luxury automotive distributor. StarChase runs dealerships in Hong Kong and China, distributing luxury cars such as Porsche, Aston Martin and Volvo.

According to news reports, in 2014, StarChase acquired Wearnes Automotive Pte Ltd from United Engineers Ltd for S$445 million. With the acquisition, StarChase distributes luxury automotive brands, including Bentley and Lamborghini, in Southeast Asia, Hong Kong and China.

Early last year, a news report by Bloomberg said Samling was going to list its automotive business, together with StarChase, on Bursa Malaysia and the Singapore Exchange. The report added that the group was looking to raise RM1 billion from an initial public offering.

However, Samling denied that it has any financial interests in Wearnes or StarChase.

The share price of DRB-Hicom has risen 25.88% so far this year to last Thursday’s close of RM2.14 per share as sales at its 50.1% subsidiary, Proton Holdings Bhd, grew more than 40% in the first quarter of the year compared with the corresponding quarter due to the popularity of the X70 model.

Hong Leong Investment Bank’s analyst Daniel Wong has ascribed a target price of RM2.58 to DRB-Hicom, based on the sum-of-parts valuations of its businesses, including the transfer of assets from Proton and liabilities to the local car manufacturer.

“Operationally, Proton’s new SUV, the X70, has received encouraging sales orders of over 20,000 units since its official launch last December, with over 5,000 units delivered. The successful launch of the X70 will provide confidence for investors on Proton’s subsequent new model launches and the continued strong support from Geely in turning around Proton,” he says in a report on DRB-Hicom.

As for Sime Darby, its motor business is the second largest contributor to the group’s bottom line, giving a profit before tax (PBT) of RM543 million in the financial year ended June 30, 2018 (FY2018), behind the industrial segment, which contributed RM612 million.

In contrast to DRB-Hicom, the conglomerate’s share price has declined 7.95% year to date to last Thursday’s close of RM2.20. The group reported a 23% drop in net profit to RM2.06 billion in FY2018 from the preceding financial year.

However, in the first half of the financial year ending June 30, 2019 (FY2019), Sime Darby reported a growth of almost 60% in its continuing operations’ net profit to RM575 million from RM360 million in the corresponding period.

The motor division’s core PBT for 1HFY2019 was RM225 million, which was 16.4% lower than in 1HFY2018, mainly due to the softening of the automotive industry in most markets the division operates in, particularly China, says the group when announcing the financial results for the period.

Kenanga Investment Bank’s analyst Wan Mustaqim Wan Ab Aziz has ascribed a target price of RM2.35 to Sime Darby, which was lower than his earlier projected fair value for the conglomerate, to reflect the weak market conditions for its China’s motor division.

 

 








Related Stocks

BURSA 6.060
DRBHCOM 2.350
FCW 0.610
GPA 0.105
JASKITA 0.110
JKGLAND 0.075
KENANGA 0.490
MARCO 0.115
SIME 2.300

Comments

Login to comment.