A welcome relief

16 March 2019

Dear Fellow Investor,

Last Sunday there was a market positive  article in the Star which was a welcome relief from the usual dose of gloom and pessimism such as  trade wars, Brexit, global economic slowdown, political uncertainty etc.

The article  profiled Dr Li Chunrong, a veteran auto turn around expert and the new CEO of Proton. He is turning around Proton after years of massive losses. In the last few months he has raised the image of Proton with the launch of the X70 SUV.

The X70  represents a Geely/ Proton product which incorporates the Volvo technology.  Volvo according to Road and Track magazine is the world’s safest car.

Geely bought out Volvo a few  years ago and Geely because of the Volvo technology is the safest and most popular car in China. The new Proton may soon have that reputation.

Customer surveys have been positive and there is a long waiting list to purchase the X70.

The bottom line speaks loudly. In the first 2 months sales rose 42% year on year to 12,300 units.

Market share has also risen and the target is to sell 90,000 units this year.

Dr Li forecasts break even for 2019 and profits by 2020.  He is well on his way.

He has dramatically cut costs by squeezing the distributers who were inflating their cost of parts. He is also  consolidating the sales and service centres.  In the past Proton had outlets which sold the cars but did not service them.  Now he has directed them to offer both sales and service under one roof.   He has optimized plant capacity by moving  plants to Tanjung Malim where before they were scattered over the country.

He is also bringing in auto talent from  Germany, Japan,US, China, and Canada who have seats on the board. Before there was only talent from Malaysia. Now there is talent from 14 countries.

Turning around Proton has been a challenge for him but he has a well thought out plan and the technical, financial resources to make it a success. He works 12 hours a day 6 days a week and he  said  he is a kumin ren   meaning someone destined to lead a very hard life.

Dr Mahathir has given the X70 a very good rating and is impressed by the technology advances and sophistication of the vehicle. 

 

Dr M is himself a car expert and has a large collection of classic cars which he donated to the people in his museum in Langkawi

Although I am not recommending to buy DRB Hycom (Proton holding company)  I am always on the lookout for companies who are well managed, have a great product and are focused on  cost cutting.

We are tentatively planning our first Investors Club meeting on Saturday 6 April 11am at my office in Phillip Capital. Some of you have expressed interest and will keep you posted as to the agenda.

Invest well and grow your wealth
Bill

Critter of the week is a giant but gentle dog . He is a wolf mixed breed who was rescued by a kind dog lover who found him abandoned on the street.