Tan Chong Motor reported another quarter loss with a net loss of -RM18m for its 2QFY23, which brought 1HFY23 net loss to – RM23m. This was weaker than both the house’s and consensus’s expectations. The shortfall against forecast is said to be due to worse than expected USD:RM performance and weaker than expected sales.
Group 2QFY23 revenue was down -24%yoy on lower contribution from autos mainly, which was dragged by lower sales as a result of prolonged supply chain disruption and stiffer competition in both domestic and overseas markets. EBITDA fell -27%yoy given the weaker sales, a weaker Ringgit and higher operating expenses. Meanwhile, the financial services division was negatively impacted by provisions for impairment loss on hire purchase receivables in the quarter (vs. a reversal in 2QFY22).
Indochina operations remained in the red with Vietnam registering deeper LBITDA of -RM10m (2QFY22 LBITDA: -RM0.4m) on the back of a halving in revenue. Termination of the group’s exclusive distributorship of CBU MG vehicles in Vietnam effective June 2023 could further drag the Vietnam unit’s near-term performance. On a positive note, however, TCM is targeting to introduce a rebadged version of SGMW’s N300P light truck for the Vietnam market in 4QFY23. The model will be assembled at TCM’s Danang plant which could improve the plant’s utilisation rate, though there is no clarity yet on prospective volumes at this juncture. As a yardstick, the commercial vehicle segment (comprising mainly pick-ups, small trucks & light trucks) made up 24% (35,284 units) of Vietnam’s Jan-Jul23’ auto sales, based on data from Vietnam Automobile Manufacturers’ Association.
MIDF is revising down FY23F/24F to a deeper net loss of -RM58.1m/-RM46.9m from -RM20.3m/-RM38.1m previously to reflect weaker sales volume and higher operating cost.
The house valuation continues to peg TCM at 0.23x FY24F PBV multiple, at -1SD below the historical mean given the weak outlook in the near term from stiff competition while recovery for the group’s Indochina operations might be extended out further given the loss of its MG distributorship
