TCM reported core PATMI of RM34.5m in 4QFY21, which lowered FY21 LATMI to -RM59.1m, above HLIB’s expectation of -RM98.5m, but slightly below consensus’ -RM53.5m. We expect TCM’s performance to improve in FY22, in tandem with recovery of Malaysia economy as well as the extended SST exemption to Jun 2022. However, we are concerned with the ongoing stiff competition within Malaysia market and political uncertainty in Myanmar. Maintain our SELL recommendation on TCM with unchanged TP: RM1.00 based on unchanged 10x PE to FY23 earnings.

Above expectation. TCM reported core PATMI RM34.5m for 4QFY21, which lowered FY21 LATMI down to -RM59.1m (FY20: -RM73.9m). We deem the result above HLIB’s FY21 expectation of LATMI -RM98.5m (60.0%), but slight below consensus LATMI -RM53.5m (110.5%). EIs of +RM38.9m were recorded in FY21 mainly attributed to forex gain and gain of disposals.

Dividend: None.

QoQ: Bottom line turned around to PATMI RM34.5m in 4QFY21 (vs. LATMI -RM45.3m in 3QFY21), mainly from higher group’s automotive sales volume (following ease of lockdown measures) and improved margins across the board.

YoY. Bottom line improved to PATMI of RM34.5m (vs PATMI RM2.5m in 4QFY20) on improved domestic sales volume, turnaround of Vietnam operations and lower effective tax expenses.

YTD. Losses narrowed to LATMI -RM59.1m in FY21 (vs. LATMI -RM73.9m in FY20), mainly due to improvements in Vietnam operation post discontinuing Nissan distribution and commencement of MG distributorship since 4QFY20 (no further discounting to clear unwanted Nissan inventory), which was partially offset by the longer period of lockdown measures in Malaysia and political uncertain in Myanmar.

Outlook. We expect Malaysia operation to improve in FY22 in tandem with the anticipated economic recovery as well as the announced SST exemption measure extension to 30 Jun 2022. Nevertheless, we continue to expect stiff market competition in Malaysia. Within Indochina market, we expect continued improvements (especially Vietnam) as the countries gradually move to an endemic stage. However, the ongoing Myanmar political crisis may continue to drag the group’s earnings.

Forecast. Unchanged.

Maintain SELL, TP: RM1.00. We maintain SELL on TCM with unchanged TP of RM1.00 based on unchanged 10x PE tagged to FY23 earnings. We are still relatively concerned on the continued stiff competitive domestic market environment and the political uncertainty in Myanmar.

Source: Hong Leong Investment Bank Research - 1 Mar 2022