Regarding Proton

Yesterday, the Sunday Star had an article saying that MARC has downgraded the auto industry.

Auto industry placed on negative outlook
Malaysian Rating Corp Bhd (MARC) has placed the automotive industry on negative outlook following dismal sales.

The issue of Proton really struck me here. Last week, there were many articles. Some were stating that the govt is willing to listen to talks to interested parties for its controlling stake in Proton.

How? Sounds rather interesting isn't it? Do you reckon that Proton is worth a buy?

For me, there were two interesting points in the article.

This, it added, was partly reflected by continuous deterioration in sales volume of national carmaker Proton, which was estimated at 120,000 units for 2006 compared with 152,845 units achieved in 2005.

This really says to me that Proton has lost its so-called competitive edge and is now a really different ball game altogether.

On the other hand, the current issue indicates that to me that Govt wants to help and resolve this issue.

In short, i think investing in Proton for its earnings, is rather risky at this moment of time. The problem is there for all to see. Sales is simply lacking. Proton has lost its competitive advantage for me, hence I think investing in it for its earnings is rather risky for we have no idea what will happen next.

But...

If the idea that Proton could move higher due to corporate exercises probably has its own merits.

However, everything seems to be focused too the NTA issue.

For me, on one hand, yes the plant is probably worth a lot and because of this reason, the reasoning to buy based on possibility of a favourable corporate exercise which as they say, unlock this so-called value.

But..

On the other hand, the high fancy plant indicates the inherent problem within Proton itself. As a businessman, the expensive, state-of-the-art machinery serves not much purpose if it does not deliver.

Take footie. One can buy the most expensive player but if the player does not deliver, then the so-called 'net worth' of the player could realistically diminish very soon.

And oh... the next line of that article is also interesting.

• Perodua, the other national carmaker, has effectively taken the pole position in the passenger vehicle segment, capturing about 42% market share with total sales of 118,987 units for the first nine months to September, MARC said.
  

Perodua is doing rather well, isn't it?

So why can't Proton do as well?