Investment Highlights

• We upgrade Tan Chong Motor Holdings (TCM) to HOLD (from UNDERWEIGHT) with an unchanged FV of RM0.80/share, derived by pegging to P/BV of 0.2x, on a neutral 3-star rating.

• TCM’s share price has plunged by 12% since releasing its 4Q23 results a month ago. Year to date (YTD), its share price has declined by 14%.

• Due to the share price decline, the risk-reward is now balanced, with only an 8% gap to our FV. Hence, the upgrade to our recommendation.

• Management have recommenced its share buyback with a total purchase of 45k shares in the past month. This purchase is part of its approval on 1 June 2023 to buy back up to 10% of its issued shares. However, we note the current pace of share buy back is not convincing with aggregate purchase <0.2% since the approval of the program.

• We visited two Nissan showrooms over the past week, and here are our observations:
  
  ➢ We note that there is a crowd, people are testing out Nissan cars, in particular, the Almera Black edition.
  
  ➢ The salesman said reception to this model has been positive.
  
  ➢ Stock of Almera Black edition is readily available with delivery period of 7-10 days upon financing approval.
  
  ➢ Apart from Almera Black edition, there are no other new models in the pipeline.
  
  ➢ There are no “freebies” or “extra” discounts conferred, which we find perplexing as every showroom at other marquees that were visited are dangling carrots as part of the Hari Raya promotions.

• Risk to our call includes the following:
  
  ➢ The weaking MYR against the USD will continue to negatively impact operating costs.
  
  ➢ Slower than expected rollout of new car models will weaken TCM’s position as other marquees are displaying 2-3 new models or facelift edition already.

• The stock currently trades at 0.22x FY24F P/BV, which is 10% higher than its 3-year historical average.

Source: AmInvest Research - 8 Apr 2024