Almera drives up sales

Almera drives up sales
Business & Markets 2013
Written by Maybank IB Research
Tuesday, 14 May 2013 10:06


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TAN CHONG MOTOR HOLDINGS BHD []
(May 13, RM6.00)
Maintain buy at RM5.95 with a revised target price (TP) of RM7 (from RM6.42): We are raising our TP for TCM to RM7.00 (+9%), pegged to an unchanged 12 times 2014 financial year price-earnings ratio, following a 9% and 13% upgrade in our 2014 and 2015 earnings forecasts, on higher vehicle sales estimates and lower component costs.

We now expect TCM’s sales to be stronger at 65,000 units (+8%) in 2014 and 70,000 units (+13%) in 2015, fuelled by the mass market model launches ahead. Valuations remain undemanding with the stock trading at just 10.2 times 2014 earnings.

The Nissan franchise is gaining momentum in Asia and TCM is optimistic in improving Nissan’s market share in Malaysia, based on new models to be launched in 2013 and 2014. Nissan’s penetration into the B-segment via its Almera model has been encouraging. Since this model was launched in November 2012, 22,000 units have been sold (16,000 units already delivered).

TCM plans to bring in a mini MPV model (possibly Evalia) in the fourth quarter of 2013 (4Q13) to compete with Proton’s Exora, Perodua’s Alza, and Toyota’s Avanza models. It aims to break into the A-segment market via the Datsun marque in 2014. These are volume churner models.

The yen has weakened by 17% year-to-date and 23% year-on-year (y-o-y) against the US dollar, 8% below our base case assumption of ¥100/RM3.22 average for 2013. This is positive for TCM, due to cheaper component costs.

Since January 2013, 35% of TCM’s imported component costs have been denominated in yen and 65% in US dollars (previously, 80% in US dollars). We expect the cost savings to kick in 1Q13. Our sensitivity analysis suggests a potential 18% net profit expansion if the yen stays 8% below our baseline for the rest of 2013.



Expect solid 1Q13 results, underpinned by outstanding sales growth. Despite a seasonally slower quarter, TCM managed to sell 14,713 units in 1Q13 (29% quarter-on-quarter [q-o-q], 78% y-o-y) supported by a strong order backlog of its highly popular Almera model.

Coupled with cost savings from TCM’s higher exposure to the softer yen, we expect TCM to report 1Q13 net profit of RM65 million to RM75 million (+35-55% q-o-q; +113% to 146% y-o-y), accounting for 21% to 24% of our FY13 full year forecast. — Maybank IB Research, May 11



This article first appeared in The Edge Financial Daily, on May 14, 2013.[You must be registered and logged in to see this image.]