Tan Chong’s 9M16 losses within expectations
KUCHING: Tan Chong Motor Holdings Bhd’s (Tan Chong) first nine months of 2016 (9M16) losses have either come within or exceed analysts’ estimates.
In a filing on Bursa Malaysia, Tan Chong revealed that the group recorded loss after tax of RM58.4 million for the current year to date ended September 30, 2016, compared to profit after tax of RM66.9 million in the corresponding period which was mainly impacted by foreign exchange rates and weaker ringgit.
According to the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research), Tan Chong’s 9M16 core net loss of RM60 million was within its expectation.
It accounted for 74 per cent of its RM81 million core net loss for financial year 2016 forecast (FY16F) but looked to have missed consensus’ estimate of a RM49 million net loss.
MIDF Research expected fourth quarter of FY16 ( 4QFY16) to worsen given a weaker ringgit, year-end discounting and new launches by peers.
On the other hand, Tan Chong’s 9M16 core loss after tax and minority interests (LATAMI) of RM50.1 million was deemed above the research arm of Kenanga Investment Bank Bhd’s (Kenanga Research) expectation but below consensus core net loss estimates, of RM70 million and RM49.1 million, respectively.
“No dividend was declared, as expected,” it said.
Kenanga Research saw that the path forward is still challenging, as the research arm continued to see the adverse effects of high US dollar/ringgit forex rates against Tan Chong’s business model, even more so as seen from the adverse indication in recent forex trends.
“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 need to be done to improve the sales outlook given the lack of new model launches until 2018, barring upcoming facelifts, to keep consumer demand constant,” the research arm said.
All else, the research arm believedthegoingpredicamentwill 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 marketing and higher import cost on unfavourable currency fluctuations.