Tan Chong Motor Holdings Berhad posted a core net loss of -RM87.0m for 3QFY24, bringing total core losses for 9MFY24 to -RM140.5m. This fell short of projections, surpassing both MIDF IB's and the consensus full-year loss projections.
The Group's revenue registered a steep decline of -28.8%yoy in 3QFY24, mainly due to a drop in the automotive segment's revenue (- 25.8%yoy) which was impacted by subdued consumer sentiment and a highly competitive market landscape. The segment's LBITDA, however, narrowed by +61.8%yoy, supported by a stronger Ringgit. The financial services (hire purchase and insurance) segment recorded a revenue increase of +9.0%yoy, while its EBITDA improved by +27.8%yoy, driven by a reduction in impairment losses on hire purchase receivables.
The core LATAMI deepened by -83.5%yoy, driven largely by the impact of diseconomies of scale. Compared to 2QFY24, revenue dropped by – 15.1%qoq as a result of weaker automotive sales, driving a much steeper core LATAMI of -RM87.0m (-163.9%qoq).Outlook. In Malaysia, TCM is set to introduce the all-new Nissan Kicks e-Power, a B-segment SUV, in Dec-24.
The vehicle is expected to be priced below RM130k, positioning it competitively in the hybrid SUV segment. Reportedly, TCM will begin exporting Malaysian-assembled vehicles to overseas markets for the first time in 4QFY24. In Vietnam, the
Group expects the recent launch of the GAC M6 Pro (C-segment MPV), to boost sales volumes, with plans to transition to CKD assembly by 4QFY25.
MIDF IB has revised its FY24E/FY25F estimates by – 97%/-255%, reflecting weaker automotive sales volumes. As a result, target price has been revised downward to RM0.36 (from RM0.77), with a lower P/BV valuation of 0.1x (from 0.2x) due to the lack of catalysts fora rerating. This prompted a downgrade in call from NEUTRAL to SELL. The house maintains a cautious view of the earnings outlook, anticipating continued weakness in the near term.
