TAN CHONG MOTOR HOLDINGS BHD

Target price: RM1.68

TAN CHONG Motor Holdings’ (TCM) new agreement to exclusively distribute, assemble and provide after-sales service of King Long coaches and buses in Malaysia will further strengthen its auto business, said JF Apex Research.

The research house said it also anticipated better contribution from the group’s commercial vehicle segment.

“Besides, we expect the utilisation rate in its Segambut plant to increase further in the near term with the upcoming assembly line for King Long products,” it said.

At the moment, the utilisation rate for the Segambut plant is at 40%.

However, the research house said it was still cautious on the group’s outlook amid the current headwinds in relation to uncertainty in forex, stringent hire-purchase approval and tepid consumer sentiment towards big-ticket items.

It said the zero-rated goods and services tax had only rendered temporary relief to sales.

TCM announced on Wednesday that its unit, TC Trucks Sales Sdn Bhd, had entered into an agreement with Xiamen King Long United Automotive Industry Co Ltd (King Long).

King Long is a company incorporated in China that specialises in the design, production and sale of various buses, mini buses and coaches.

The agreement is for five years from the date of commencement and may be extended, subject to the stipulated terms, the company said.

The agreement will see the group incur around RM6.5mil for working capital and this will be funded by internal funds.