KUALA LUMPUR (Sept 4): Shares of Tan Chong Motor Holdings Bhd (KL:TCHONG) slipped on Wednesday to their lowest in two decades, as analysts took a dim view following a larger-than-expected quarterly loss.
Tan Chong fell to 70.5 sen, its lowest since April 2004. At that price, the company — which mainly assembles Nissan-branded vehicles — had a market capitalisation of RM474 million. Trading volume however was light, with only 68,800 shares changing hands as at 10.30am.
In a note on Wednesday, Hong Leong Investment Bank (HLIB) Research maintained its 'sell' call on the stock, as it is concerned over the group’s continued weak sales volume amid deteriorated market condition.
The house has a target price of 65 sen for the stock, based on an unchanged 12 times price-earnings tagged to earnings for the financial year ending Dec 31, 2025 (FY2025).
Nonetheless, HLIB Research expects Tan Chong to benefit from the recent share appreciation of the ringgit against the US dollar.
At home, it said the Malaysian market remains competitive due to attractive new launches by various competing original equipment manufacturers.
The expected launch of the new e-POWER Nissan Kicks in the fourth quarter ending Dec 31, 2024 (4QFY2024) and new GAC models in Vietnam are expected to improve the group’s sales volume from FY2025 onwards.
"Other Indo-China markets are expected to remain weak in the second half ending Dec 31, 2024 (2HFY2024)," the house added.
For 1HFY2024, HLIB Research noted that Tan Chong recorded a core loss after tax and minority interest of RM61.7 million, compared with RM55.9 million in 1HFY2023, due to weak group sales volume and increased material and operating costs.
The house anticipates improvement from 2HFY2024 with new Nissan e-Power models, GAC distribution in Vietnam, and the appreciation of the ringgit.
In Malaysia, the group's sales fell to 4,811 units in 1HFY2024, a 9.5% year-on-year (y-o-y) drop, with operating profit down 27.3% y-o-y, but the new Nissan Kicks and other upcoming models are expected to boost sales.
In Vietnam, sales plummeted 89.8% y-o-y to 145 units, due to the end of the MG distributorship, but new GAC models and upcoming launches are expected to revitalise the segment.