A QUESTION OF BUSINESS | The key to coming to that conclusion is to read carefully the agreement made between Proton Holdings Bhd’s 100 percent shareholder, listed DRB-HICOM which is in turn 56 percent-owned by Syed Mokhtar Albukhary, and China’s Zhejiang Geely Holding Group Co Ltd.

Geely is taking a 49.9 percent stake in Proton Holdings via the issue of new shares. The remaining 50.1 percent will be held by DRB-HICOM. The price for this was not disclosed in the announcement on May 24 but was to be satisfied in cash, and with the grant of a licence to manufacture and sell Geely’s Boyue model (NL3) under the "Proton" brand in the right-hand drive markets in “certain Southeast Asian countries for the life cycle of the model”.

That’s basically re-badging - nothing more. DRB-HICOM is currently in the process of estimating the true value of this in-kind injection of the "Boyue" model, DRB-HICOM said.

A day later, DRB-HICOM disclosed to analysts that the 49.9 percent stake in Proton is valued at RM770 million (minus the value of lands and other assets). Geely will inject RM170 million in cash and give Proton the rights to the Boyue model, valued at RM600 million.

Pointedly the deal includes only Proton’s automotive assets and others related to the production of vehicles. Proton has other valuable assets, including land, which is not included in the transaction. The most valuable of this is land of some 250 acres in Shah Alam on which part of its production facilities are located.

DRB-HICOM’s announcement to the stock exchange said: “Real estate held by the companies within the Proton Group, other than the land located at Tanjung Malim are excluded from the scope of the Proposed Joint Venture provided that such real properties presently used by the Proton Group for the manufacturing and assembly activities of present Proton car models shall be rented or leased back to the Proton Group at nominal consideration for the duration required to continue the Existing Automotive Activities.

“The manufacturing, engineering, testing, related research and development and administrative activities currently based at the Shah Alam manufacturing plant shall be relocated to the Proton Group's manufacturing plant located at Tanjung Malim.”

That means the Shah Alam facilities will be relocated to the Tanjong Malim where Proton has excess capacity within five years and the valuable Shah Alam land will be returned to DRB-HICOM.

Based on the deal price as reported of RM770 million, the whole of Proton’s automotive business is currently valued at RM1,543 million, excluding the other assets and especially the valuable Shah Alam land. But that excludes Lotus too, 100 percent of which is being sold simultaneously to Geely and Syed Mokhtar for 100 million pounds, about RM550 million at current exchange rates. That values Proton’s own automotive business together with Lotus at RM2,093 million (1,543 + 550 - let’s round it off to RM2.1 billion).

The government, through Khazanah Nasional sold its 42.7 percent stake in Proton for RM1.29 billion in 2012 to DRB-HICOM which subsequently made a general offer and took Proton private, spending in all some RM3 billion for Proton. That means all assets of Proton.

Let’s take that 250 acres of land in Shah Alam now and establish a value for it to get an approximate value of Proton now, including land. Listings for industrial land currently quote prices of around RM300 per sq ft in Shah Alam. As 250 acres is large, this can be used to build a mammoth office and commercial complex with the average price of land anywhere between RM300 psf to 500 psf. If we take an average figure, the land price could be RM400 psf.

That 250 acres in Shah Alam would be worth RM4.4 billion (400 X 250 X 43,560), rounded off to one decimal point, at today’s prices, a huge amount. Add this to Proton’s estimated worth for its automotive business of RM2.1 billion and the whole of Proton is worth at least RM6.5 billion...