FY21 was severely affected by lockdown measures within the group’s geographical operations. Malaysia operation is expected to leverage onto the extended SST exemption measures till mid-2022. Similarly Indochina market is also recovering with Myanmar people already starting to adapt to the new regime. However, we are still relatively concern on the competitive market in Malaysia. Maintain our SELL recommendation on TCM with unchanged TP: RM1.00 based on unchanged 10x PE to FY23 earnings.

FY21 result recaps. TCM recorded core LATMI -RM59.1m for FY21, mainly due to prolonged lockdown restrictions duration during the year. Nevertheless, 4QFY21 showed substantial improvement to PATMI RM34.5m, on the back of recovery of automotive markets in Malaysia and Vietnam, following ease of lockdown since mid Aug and the economy gradually re-opened.

Malaysia. Sales and production have normalised in 4QFY21 and management expects momentum to continue into 1HFY22. While the management did not provide launching guidance, we anticipate that TCM to introduce Nissan Kicks, Nissan X-Trail and Serena in 2022. However, we remain cautious on the group’s domestic market outlook, given the anticipated stiff competition for the mass market segment with attractive models Honda City, Honda City Hatchback, Toyota Vios, Toyota Yaris and Proton X50 competing in the same price segment of RM80-100k.

New business. Management updated on the group’s new focus on car subscription business model (started in 2019), which has gained traction with current fleet size of 2,843 units (from 1,780 units in 2020) under its own Renault Subscription platform and GoCar Subs platform. Management claims they are currently the largest subscription company in Malaysia by fleet size. Previously, management guided to breakeven in 2022, when fleet size grows to 4,000 units.

Vietnam. Similar to Malaysia, sales has regained traction with 1,228 units in 4QFY21 after the country re-opened since Aug. TCM is the exclusive distributor for MG models and SGMW pickup and cargo van in Vietnam. Previously, management mentioned that they are exploring opportunities with third parties for the potential utilization of its Danang plant, which we can only expect a conclusion towards the end-2022/early- 2023.

Other countries. Laos and Cambodia markets recovered in 4QFY21, as governments gradually move to an endemic stage. Similarly, management guided a normalisation of Myanmar market, as the people started to carry out their daily activities while businesses operate as usual.

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. While we expect a recovery in 2022, we are still relatively concerned on the continued stiff competitive domestic market environment.

Source: Hong Leong Investment Bank Research - 3 Mar 2022