TCM expects to ride on new model launches and higher car prices

PETALING JAYA: Tan Chong Motor Holdings Bhd (TCM), which recently returned to the black, is expected to continue generating profits for the remainder of the year from new model launches and increased car prices with the reintroduction of the sales and service tax (SST).

CGSCIMB said it is cautiously optimistic about the second half 2018 outlook for TCM.

“We expect TCM to benefit from new model launches, such as Nissan Serena Hybrid. We learnt it had received over 4,000 bookings for the Serena Hybrid since it was launched in May.

“In addition, we expect the stronger sales volume in Malaysia to sustain in the July to August period, before the reintroduction of SST next month.”

The research house said the reintroduction of SST would increase the average vehicle selling prices to Malaysian consumers.

“Meanwhile, we are also concerned about the volatility of the ringgit, which could affect the group’s earnings recovery.”

Kenanga Research noted that TCM has shifted its strategy from volume-play to profit margin-play, as it is focusing more on products that are skewed towards higher-margin models.

“Thus, car sales volume will only be able to register negative growth as traditionally, out-going Nissan Almera contributed 30% of its total car sales. Nevertheless, the launch of the all-new 2018 Nissan Serena S-Hybrid is expected to sustain its car sales volume.”

Moving forward, Kenanga Research noted that the group was expanding its Indochina operations, given the larger market volume.

TCM is improving its profitability with margin expansion from the high-margin car models, despite the expected weakness in car sales volume with the SST, according to the research house.

MIDF Research noted that TCM recorded total industry volume of 3,008 units in Jun, its strongest in the past 18 months.

“Market share loss looks to have bottomed and resumption of new launches this year (after a two-year lull) underpins this.”

TCM, which is the distributor of Nissan vehicles in Malaysia, returned to the black with a net profit of RM12.36mil for the second quarter ended June 30 compared with a net loss of RM23mil in the corresponding period last year.

Consequently, the automotive company posted an earnings per share of 1.89 sen compared with a loss per share of 3.52 sen previously.

During the quarter in review, Tan Chong saw its revenue declining 9% to RM1.09bil from RM1.2bil previously.