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DRB-HICOM Bhd (1619) has won a RM7.55 billion government defence contract, a job analysts said will help boost the group’s profile among investors.

DRB-HICOM announced to Bursa Malaysia yesterday that the contract will run for seven years starting this year.

The announcement confirms a Business Times report on Monday stating that the group was on the verge of winning a letter of award from the government for the supply of armoured personnel carriers (APCs).

“This will definately help the company in terms of adding to its revenue. As for the profitability of the venture, it depends if it can keep its costs down,” Edmund Tham, Mercury Research head of research, said.

HwangDBS yesterday reaffirmed “buy” call on DRB-HICOM with a target price of RM3.55 a share.

The research house said the contract could raise DRB-HICOM’s earnings per share by as much as 13 per cent.

Another analyst estimates the group’s pre-tax margin from the contract at about 15 per cent, or roughly close to RM1.05 billion.

Tham said: “That is a very hefty sum, and should propel the company to the next level.

“I like DRB-HICOM because it is trading at a single-digit forward price-to-earnings ratio of less than seven and has a dividend ratio of 5.92 per cent over a five-year period”.

Analysts also said that DRB-HICOM will retain the rights to market and sell APCs under its own brandname abroad.

“It’s easy to buy a fish, but it is another thing to fish commercially,” said an analyst, adding the venture will help the group and the Malaysian defence industry in the longer run, as they gain more expertise in the sector to market local products abroad.

Tham, meanwhile, pointed out that the contract was the second major boost for DRB-HICOM within six months.

“First, it was the Volkswagen assembly deal, and now this. I believe research exposure on DRB-HICOM is bound to increase, as investors become increasingly curious on this new animal, and how the company is transforming itself to be,” he added.

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Bank Negara has not allowed the Employees Provident Fund (EPF) board to hold more than 45% of the paid-up share capital of RHB Capital Bhd.

In a note to Bursa yesterday, RHB Cap said that RHB Investment Bank Bhd and CIMB Investment Bank Bhd, on its (RHB Cap’s) behalf, said that Bank Negara was not able to consider the EPF’s application via a letter dated Feb 25.

“Accordingly, EPF’s irrevocable undertaking to subscribe under the rights issue shall be for a minimum of 45% of the total rights shares,” it said.

RHB Cap had proposed to acquire 80% of PT Bank Mestika Dharman for RM1.16bil and also a proposed put and call option for 9% of Bank Mestika.

RHB Cap also proposed a renounceable rights issue of new shares of RM1 each in RHB Cap to raise about RM1.3bil.

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Telekom Malaysia Bhd chalked up a pre-tax profit of RM1.36 billion for the financial year ended Dec 31, 2010, a jump by 47.6 per cent compared with RM921.6 million recorded in 2009.

Revenue increased to RM8.791 billion compared to RM8.608 billion, fuelled by increasing demand for Internet and data services.

Speaking at a press conference after announcing the company’s annual results today, Group Chief Executive Officer Datuk Seri Zamzamzairani Mohd Isa said TM’s market position remained strong despite the challenging economic environment and intense competition.

“2010 was nothing short of historic for TM. With the launch of HSBB (high speed broadband) and UniFi, we are transforming the network to a fully IP network,” he said.

Asked on capital expenditure for the financial year 2011, he said it would be about RM3 billion before the government’s contribution on HSBB have been allocated.

“For financial year 2010, HSBB capex of RM1.6 billion was lower than anticipated. In one year since the launch, we have achieved more than 780,000 premises passed and have installed the service to close to 50,000 customers to date.”

TM launched UniFi, a HSBB project in March 2010 and was the first to introduce tripple play services in the country.

Zamzamzairani also said while the company was on track to meet the UniFi target of 1.1 million premises passed and 78 exchange areas by end of this year, the company aimed to achieve 1.3 million premises passed by end of 2012.

“Due attention would be given to ensure the rollout of UniFi would be effectively managed from the aspect of cost effectiveness and customer satisfaction,” he explained.

On the outlook for financial year 2011, TM targets a revenue growth of 2.5 per cent and earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 32 per cent.

TM’s EBITDA margin was lower at 33.1 per cent for the financial year 2010 compared to 34 per cent in 2009 due to higher expenses related to UniFi and the National Broadband Initiative related activities.

Internet revenue increased by 5.9 per cent to RM1.653 billion. TM’s current cash position stands at RM3.5 billion. The company annnounced a dividend of 29 sen per share.

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