Friday, October 8, 2010

Proton Recall for Gen2 and Satria Neo Car

KUALA LUMPUR, Oct 8 (Bernama) - Proton Holdings will see minimal impact from the recall of Gen2 and Satria Neo, said MIDF Research Friday.

"We expect some negative reactions to the recall, further weakening of Proton share price may provide the opportunity to buy the shares at a lower level," it said in a research note.

MIDF however said it was maintaining a "buy" review on the Proton stock, with the target price unchanged at RM5.80. The national carmaker yesterday announced a voluntary recall of its Gen2 and Satria Neo cars made between 2004 and 2008 due to a clock spring malfunction that raises potential safety concerns. The voluntary recall, part of its Global Quality Assurance programme, affects 15,911 (two per cent) of 660,000 cars produced and sold over the four-year period. The clock spring connects switches and airbag to the radio, horn and cruise control. OSK Research said Proton shares are expected to see a temporary negative reaction today as the improved quality perception would reassessed by potential investors.

"This could put some downward pressure on Proton's sales until more clarification and statistics are shown on the number of cases affected and how the issue cropped out in the first place," it said in a research note.

It also maintained "buy" call on Proton, with the target price of RM5.67.

"The downward pressure today would give opportunities for investors to accumulate as we continue to remain positive on Proton," it said.

OSK said Proton saw no impact on the last recall of 34,000 Proton Savvy cars following a possible wheel bearing problem which found the possibility of water entering the rear wheel bearing in April 2008. Despite the concerns, earnings were not affected as Proton's sales remain resilient as the Savvy was not a key contributor to total sales due to its small volume. It said Proton's share price was not hit at all during the recall given the earnings potential from the newly-released Proton Saga back then.



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