Stock Name: TCHONG
Company Name: TAN CHONG MOTOR HOLDINGS BHD
Research House: MAYBANK
Tan Chong Motor Holdings Bhd
(May 19, RM4.30)
Downgrade to sell at RM4.30 with revised target price of RM4 (from RM5.75): Results in 1Q11 were weaker than initially expected and subsequent earnings should weaken as the supply chain disruption issue kicks in from 2Q. As such, we have cut our 2011 forecasts by 14.2%, tactically lowered our target price to RM4 and downgraded our call to 'sell'.
Recurring net profit of RM79.5 million in 1Q (+42% quarter-on-quarter [q-o-q]; +15% year-on-year [y-o-y]) accounts for 26% of our initial full-year forecast of RM304.9 million. However, this is below expectation for we expect a weaker 2H owing to the supply chain disruption affecting the auto industry post the Japan earthquake and tsunami in March.
TCM reported stronger q-o-q and y-o-y results, at the revenue (+35.5% q-o-q; +30% y-o-y) and net profit levels. It sold 9,463 units (+12.9% q-o-q; +10% y-o-y) in 1Q according to statistics from the Malaysian Automotive Association.
Management has guided for a 15% to 20% q-o-q earnings contraction in 2Q. With the full impact from the supply chain disruption to be felt in 2H, the weakness in sequential earnings is expected to extend up to 4Q.
We cut our 2011 earnings forecasts by 14.2%, taking into account further weakness ahead. We have lowered vehicles sales expectation for 2011 by 5.3% to 36,000 units and average selling price by 2% to RM98,000.
Our RM4 target price is based on a reduced 2011 price-earnings ratio of 10 times, which represents the lower end of its historical PER range (from 14 times previously). Our 40 sen earnings per share is below 45 sen guidance (management's guidance is unchanged post briefing). ' Maybank IB Research, May 19
This article appeared in The Edge Financial Daily, May 20, 2011.
Company Name: TAN CHONG MOTOR HOLDINGS BHD
Research House: MAYBANK
Tan Chong Motor Holdings Bhd
(May 19, RM4.30)
Downgrade to sell at RM4.30 with revised target price of RM4 (from RM5.75): Results in 1Q11 were weaker than initially expected and subsequent earnings should weaken as the supply chain disruption issue kicks in from 2Q. As such, we have cut our 2011 forecasts by 14.2%, tactically lowered our target price to RM4 and downgraded our call to 'sell'.
Recurring net profit of RM79.5 million in 1Q (+42% quarter-on-quarter [q-o-q]; +15% year-on-year [y-o-y]) accounts for 26% of our initial full-year forecast of RM304.9 million. However, this is below expectation for we expect a weaker 2H owing to the supply chain disruption affecting the auto industry post the Japan earthquake and tsunami in March.
TCM reported stronger q-o-q and y-o-y results, at the revenue (+35.5% q-o-q; +30% y-o-y) and net profit levels. It sold 9,463 units (+12.9% q-o-q; +10% y-o-y) in 1Q according to statistics from the Malaysian Automotive Association.
Management has guided for a 15% to 20% q-o-q earnings contraction in 2Q. With the full impact from the supply chain disruption to be felt in 2H, the weakness in sequential earnings is expected to extend up to 4Q.
We cut our 2011 earnings forecasts by 14.2%, taking into account further weakness ahead. We have lowered vehicles sales expectation for 2011 by 5.3% to 36,000 units and average selling price by 2% to RM98,000.
Our RM4 target price is based on a reduced 2011 price-earnings ratio of 10 times, which represents the lower end of its historical PER range (from 14 times previously). Our 40 sen earnings per share is below 45 sen guidance (management's guidance is unchanged post briefing). ' Maybank IB Research, May 19
This article appeared in The Edge Financial Daily, May 20, 2011.
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