Tan Chong Motor to play catch up in coming quarters of 2017
KUCHING: Tan Chong Motor Holdings Bhd’s (TCM) growth trajectory is expected to rebound further in the coming months on seasonal factors and sales campaigns.
Analysts at Maybank Investment Bank Bhd’s research arm (Maybank IB Research) said despite the widened losses seen in TCM’s first quarter of 2017 (1Q17) results, not all hope is lost for the group.
It explained, “The rebalancing of TCM’s marketing strategy in March 2017, offering an option of either extended warranty or discounts to consumers, has led to a pick-up in domestic monthly sales figure in March 2017 (an increase of 45 per cent month-on-month to 2,600 units).
“We expect sales to rebound further in the coming months on seasonal factor (pre-Hari Raya) and sales campaigns.
“Also, despite the absence of Nissan’s component cost adjustments in 1Q17 to aid earnings, we do not rule out a half-yearly or yearly adjustments from Nissan Motor Corp going forward.”
For now, it retained its forecasts of TCM. It expected 1Q17 core net loss to narrow to RM12 million for FY17.
Aside from that, it highlighted that TCM could see a silver lining from the strengthening ringgit.
It pointed out, “Recent strength in ringgit against US dollar and Japanese yen will be positive to TCM, a net importer, should the momentum sustain.
“We estimate that circa 24 per cent to six per cent of TCM’s cost of goods sold (COGS) are imported component costs denominated in US dollar or Japanese yen.”
Maybank IB Research added, “We expect TCM to report better results in forward quarters as sales pick up while not ruling out further cost adjustments from Nissan”
On the other hand, Kenanga Research, the research arm of Kenanga Investment Bank Bhd, pointed out that TCM’s path forward is still challenging, as it foresee that the recent strength in ringgit against US dollar and Japanese yen is still insufficient to negate the adverse effects on TCM’s business model.
“Though the group may be able to keep its top-line afloat with the increase in prices as well as to offset some impact from forex, more may be needed to improve the sales outlook given the lack of new model launches until 2018, barring upcoming facelifts, to keep consumer demand constant,” it opined.
“All else, we believe the on-going predicament will continue to provide a challenging operating environment for the general automotive market with lacklustre consumer sentiment on the back of rising cost of living, tighter financing conditions dampening vehicle purchases, and intense domestic competition as well as higher operating costs from promotional events.”