• Tiong Nam reported a core net loss of RM6.5m in 1QFY21 due to lower revenue contribution from all segments as business activities were affected by the Movement Control Order (MCO) period
• Going forward, we expect some pick-up in the warehouse and logistics, and property segments as business activities resume post-MCO
• But a recovery is likely in the price. We reiterate our SELL call on Tiong Nam with an unchanged RNAV-based 12-month target price of RM0.32

1QFY21 Was Impacted by MCO

Tiong Nam reported a core net loss of RM6.5m in 1QFY21 (vs a loss of RM0.2m in 1QFY20). Revenue was down 18% yoy, mainly due to lower contributions from all segments as a result of the MCO – logistics and warehousing segment (-15% yoy), property segment (-96% yoy) and hotel segment (-8% yoy). The company reported a pre-tax loss of RM5.8m attributable to weakness across all segments and EBITDA loss from the property segment of RM2.5m (vs profit of RM2.4m in 1QFY20).

Core Net Loss Narrowed 18% Qoq

Tiong Nam recorded a headline net loss of RM5.5m in 1QFY21 vs. a net loss of RM4.3m in 4QFY20. This was attributable to 13% lower revenue qoq due to a slowdown in business activities during the MCO period. In tandem, the EBITDA margin was lower by 6.8 ppt qoq. Excluding one-off items, Tiong Nam’s core net loss narrowed 18% qoq to RM6.5m in 1QFY21.

Maintain SELL With An Unchanged Target Price of RM0.32

With the sequential narrowing of losses and expectations of improvement ahead, the results are broadly within our expectations. We make no changes to our FY21-23E earnings at this juncture as we believe Tiong Nam should see some earnings recovery in its logistics and property segment in the quarters to come. However, the hotel segment is expected to remain weak on the back of weak tourism activities globally and weak hotel occupancy. We reiterate our SELL call on the stock with an unchanged RNAV-based target price of RM0.32. Key risks to our SELL call include: (i) a fasterthan-expected economic recovery; (ii) higher property sales; (iii) a faster-than-expected recovery in tourism activities; and (iv) easing price competition for the last-mile delivery service segment.

Source: Affin Hwang Research - 25 Aug 2020