Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD
Research House: OSK




Tan Chong Motor's move to acquire a 74 per cent stake in Nissan Vietnam Co Ltd from Kjaer Group is expected to strengthen its penetration into the huge Indochina market, said OSK Research.

"We are positive on the outlook for its Indochina venture given the region's under-penetrated markets, which Tan Chong can reap tremendous potential," it said in its research note today.

OSK said with a population of 107 million and annual vehicle sales representing only 20 per cent of Malaysia's total annual sales, the long-term market potential that beckoned Tan Chong was clearly substantial.

"This will be boosted by the increase in per capital income, vehicle penetration, better road infrastructure and the banking system promoting higher purchase financing," it said.

It maintained its 'buy' call on Tan Chong at a higher target price of RM7.29 from RM6.40.

Meanwhile, MIDF Research has downgraded Tan Chong to a 'sell' with a target price of RM4.90.

In its research note here today, MIDF said the contribution from the acquisition was expected to be marginal, at best with profits to be undermined by very thin margins.

It said at the current level, the counter was trading at almost 20 times financial year 2011 earnings, which was at a significant premium to its peers at an average of 11x.

"Hence, the run-up in the share price could provide opportunities for profit-taking," it said. -- BERNAMA