PETALING JAYA: Hong Leong Investment Bank (HLIB) Research has reaffirmed its “sell” rating on Tan Chong Motor Holdings Bhd at RM1.07, with a reduced target price (TP) of 66 sen, down from 70 sen previously.
In a note today, the research firm noted that Tan Chong’s core loss after tax and minority interests (Latmi) multiplied five times to RM46 million in the second quarter of financial year 2023 (Q2 FY2023).
The group recorded a Latmi of RM9.2 million in Q2 FY2022, and RM9.8 million in Q1 FY2023.
For the first half of FY2023, Tan Chong posted a Latmi of RM55.8 million, falling short of both HLIB’s expectations and consensus estimates.
HLIB cited several factors affecting Tan Chong’s performance – intense competition in the Malaysian market, the loss of MG distributorships in Vietnam, and challenging conditions in Laos, Cambodia and Myanmar due to weakened consumer sentiment and political instability.
Furthermore, HLIB anticipates additional challenges in the second half of FY2023, namely the continued appreciation of the US dollar and rising cost of logistics and material.
“(We) maintain our ‘sell’ recommendation on Tan Chong with a lower TP of 66 sen (from 70 sen) based on 10 times the group’s PE (price-earnings) to FY2025 earnings,” it said.
As at 9.37am, Tan Chong’s share price was flat at RM1.07, giving the group a market capitalisation of RM719.04 million.