Analysts mildly positive on Tan Chong Motor tie-up with China’s King Long
KUALA LUMPUR: Tan Chong Motor Holdings Bhd’s (Tan Chong Motor) Memorandum of Understanding (MoU) with Xiamen King Long United Automotive Industry Co Ltd (King Long) has garnered mildly positive views from analysts.
In a filing on Bursa Malaysia, announce that Tan Chong Motor’s indirect wholly-owned subsidiary TC Motor Vietnam Co, Ltd (TCMV) had on October 19, 2020 entered into a MoU with King Long, a company incorporated in China, to facilitate the commencement of discussions and negotiations for the appointment of TCMV as the sole and exclusive distributor of King Long KINGO microbus model in Vietnam in both completely-built-up (CBU) and completely-knocked-down (CKD) forms.
“We are mildly positive on this news as it will help Tan Chong Motor with additional CKD pipelines for its severely underutilised Danang plant in Vietnam,” AmInvestment Bank Bhd (AmInvestment Bank) said.
“However, we understand that it is still in discussion and the group has not guided on a timeline on when the deal will be concluded.”
The research firm also noted that both the Nissan Vietnam CKD and CBU agreements with Nissan Japan have expired on September 19 and September 30, 2020 respectively.
On a separate note, AmInvestment Bank reiterated that TCMV was also appointed by SAIC Motor as the exclusive importer and distributor of CBU MG brand vehicles on May 18, 2020.
From the previous briefing, Tan Chong Motor guided that it would start to have material impact only in the fourth quarter of financial year 2020 (4QFY20), but the research firm is expecting a delay to this venture due to the global Covid-19 pandemic.
“We remain apprehensive on whether the entry of MG and King Long would be able to fully fill the void left by the exit of both Nissan CKD and CBU products.”
With multiple changes in the TCMV unit, that is, entry of King Long and the MG brand, exit of both Nissan CKD and CBU products, AmInvestment Bank will seek further clarification on its overall impact on its FY21-22F profits in Tan Chong Motor’s 3Q analyst briefing next month.