DRBHcom ... Nov10

DRB Hicom which expects to wrap up its negotiations with Volkswagen AG in Dec 2010 is aiming for a larger contribution from its services and property divisions in the medium term.

The company has been largely reliant on its automobile division, which contributed 57% of revenue in its previous financial year. However, it anticipates growth in services through 70%-owned Bank Muamalat Bhd and a number of concessions it owns along with new property launches to balance the scales in contribution to the group.

This would be achieved by expanding those businesses as the auto sector was sensitive to economic cycles and specific situations.

Bank Muamalat, which posted a pre-tax profit of RM140.6mil for the 15-month period ending March 31, is anticipating a better year and wants to spread its wings regionally through a new strategic partner.

DRB-HICOM had talked to six parties to sell a 30% stake in Bank Muamalat and efforts to find a strategic partner for the bank were still ongoing.

Another big segment of its services division, which accounted for 40.5% of DRB-HICOM’s revenue last year, is the concessions that the group has. The main companies in this segment are Alam Flora, Puspakom, Hicom Power and KL Airport Services.

Its waste management business through Alam Flora, which has the concession for the central region, is ready to expand its services to Kelantan and Terengganu.

KL Airport Services, which handles cargo at the KL International Airport, is seeking to increase its workload once KLIA 2, the new low-cost terminal, is built; and the company expects its revenue and profit to double.

Puspakom, which is awaiting its concession to be renewed and wants similar roadworthy checks on motorcycles like what is being done before the sale of passenger cars, is seeking an extension in its concession.

HICOM Power, which provides operations and maintenance services to Tanjung Bin power station, is looking to provide its services to other power plants.

Property, which was a minor contributor to DRB-HICOM revenue in the recent past, is forecast to account for 20% of group revenue in an upcoming 5-year plan through a series of new launches.

Development of the group’s projects in Glenmarie in Subang, Shah Alam and Johor is forecast to fetch a gross development value of RM9bil over the next decade. Building of homes in Glenmarie could bring in between RM700mil and RM1.2bil. The group could partner other companies in developing some of its land and that its construction arm would be involved in the development of those projects.

On its negotiations with Volkswagen, DRB-HICOM is tying up details involving product it will sell, costing, commercial terms and investment for the new joint venture. Regional distribution is part of the deal with Volkswagen and the group is also looking at hybrid and electric cars with the German auto giant. DRB-HICOM would like to get involved in the distribution of Volkswagen cars in the country.