TCHONG continues to face an uphill battle locally as its rivals flood the market with attractive new models. Its manufacturing business has been dragged down by chip shortages at its principal in Japan. In addition, in Vietnam, it will lose its right to import and distribute Morris Garages (MG) CBU cars and parts from June 2023. We maintain our forecasts, TP of RM0.80 and UNDERPERFORM call.
Our cautious stance on TCHONG stays following its 1QFY23 results briefing last Friday. The key takeaways are as follows:
Forecasts. Maintained based on FY23-24F unit sales assumptions of 13k and 14.3k for Nissan and 530 and 690 for Renault.
Consequently, we also maintain our TP of RM0.80 based PBV of 0.18x on FY24F BVPS which is at an 80% discount to the auto sector’s average forward PBV of 0.9x to reflect its less popular Nissan brand vs. other foreign brands in the market. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 5). We continue to stay cautious on TCHONG for: (i) its insignificant 1% share of the total industry volume, (ii) its lack of new launches while its competitors have successfully launched all-new models, and (iii) its inability to raise prices to pass on rising production cost, especially with the weakening of MYR against USD. Reiterate UNDERPERFORM.
Risks to our call include: (i) consumers splurging more on discretionary spending (particularly big-ticket items like new cars as high inflation eases, (ii) more attractive new models for TCHONG that appeal to car buyers, and (iii) TCHONG monetising its strategic land bank or being privatised at a premium over the market price.
Source: Kenanga Research - 29 May 2023
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Created by kiasutrader | Aug 23, 2024
Created by kiasutrader | Aug 23, 2024