For 4Q2008, Proton's net profit jumped 22 times q-o-q or 257 times y-o-y to RM236 million, while turnover increased by 18.5% q-o-q or 37.3% y-o-y to RM1.72 billion. The higher turnover is attributable to higher sale volume from newly-launched models, such Saga & Persona. The increased profitability was attributable significantly by 2 non-operational items, i.e. income of RM32 million from sale of rights for use of Intellectual Property Rights ('IPR') [which is the Jinhua Youngman Europestar RCR deal involving the re-badging of the left-hand drive Proton GEN2's in China] as well as recognition of R&D grants of RM194 million from the government under the National Autimotive Policy ('NAP'). If these 2 items are excluded, Proton would incur a pre-tax loss of RM23 million for FY2008.
While Proton may not record another sale of IPR rights, it may receive further R&D grants under the NAP. This grant is disbursed according to the amount spent, as well as the area of expenditure. For example, every dollar spent on R&D activities would qualify for a 50 cent grant. Proton, which is currently working on an MPV model, may receive similar grant in the current financial year, which is intended to defray its R&D expenditure.
Looking at the increased sale in the last 3 quarters, Proton's turnover has been boosted by sales of its newly-launched Saga & Persona models. There is a good chance that Proton's sale will continue to improve & the company may record an operating profit for this year.
From the chart below, we can see that Proton is trading in the range of RM3.50 & 4.50 in the past 6 months. Proton share price is still in a long-term downtrend, since it peaked in February 1997 at RM17.20.
Chart: Proton's monthly chart as at May 26, 2008 (source: Quickcharts)
Despite increased turnover, Proton's operating results are still disappointing. Technical outlook is still bearish. In my opinion, Proton is going to underperform the market.
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