Thursday, November 28, 2013

Tan Chong's key catalysts expected to come from new models


Published: Tuesday November 26, 2013 MYT 12:00:00 AM 
Updated: Tuesday November 26, 2013 MYT 8:49:20 AM


TAN CHONG MOTOR HOLDINGS BHD
By CIMB Research
Outperform
Target Price: RM7.73

AT a recent third quarter results analysts’ briefing, Tan Chong Motor Holdings Bhd’s (TCM) management reinforced its outlook for the next two years.

It said the financial year ending Dec 31, 2014 (FY14) would be a year of consolidation while FY15 would see it shifting gear towards its 100,000 units per annum target. The company is at the half-way point in FY13.

The research house made no changes to its earnings per share (EPS) forecasts and realisable net asset value-based target price and noted that key catalysts for TCM included the introduction of new models. The forecast for EPS growth is 6% in FY14 and 13% in FY15.

The brokerage said FY15 unit sales growth would be driven by another “killer model” but in the A-segment in which TCM does not yet have representation.

The emphasis on the budget-conscious, RM50,000 and below price point A-segment, will be timely because TCM’s management believe Malaysian consumers will start to tighten their belts when the goods and services tax (GST) is introduced in FY15.

However, the management also pointed out that GST was necessary to keep interest rates and currency conducive.

The brokerage said the absence of a special dividend in the third quarter ended Sept 30 might have been disappointing, but understandable as TCM adjusts to a year of consolidation in FY14.

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