KUALA LUMPUR: Intense competition and lack of new car launches have weighed down Tan Chong Motor Holdings Bhd's (Tan Chong) market share, said Kenanga Research.
Its analyst Wan Mustaqim Wan Ab Aziz said Tan Chong's losses from heavy "discounting" activities and under utilised Vietnam Danang plant had also contributed to the dampening market share.
"The Vietnam complete built-up (CBU) agreement with its principal will expire on September 30 this year but could be cushioned by the recent overseas distribution agreement with SAIC Motor International Co Ltd as the sole and exclusive importer and distributor for the sale of CBU MG brand vehicles and after-sales spare parts, and after-sales services in Vietnam," he said in a report today.
Wan Mustaqim said Tan Chong would launch the new Nissan Almera in the second-half this year or 2021, a B-segment sedan based on market demand, as well as the Nissan Kicks (B-segment crossover) and all-new Nissan Sylphy.
The firm cut Tan Chong's earnings for the year ending December 31, 2020 (FY20) to a core loss of RM15.3 million from a core profit of RM48.7 million.
It also reduced the company's FY21 core net profit by 44 per cent, reflecting the lower sales and higher effective tax rate assumptions.
"We maintain underperform call for Tan Chong with a lower target price of 70 sen from 75 sen per share. We expect a better FY21 on some degree of pent up purchases after holding back in FY20 and the introduction of the all-new Nissan Almera."
Despite the new launches ahead, he expects Tan Chong's efforts to gain market share to continue being challenged by competitors especially from the national car segment.
Among the key risks to its call are higher-than-expected car sales, favourable forex and higher-than-expected margin.
For the first quarter ended March 31, 2020, Tan Chong posted a net loss of RM9.26 million from a net profit of RM15.98 million, while revenue decreased 32.4 per cent to RM734.29 million from RM1.08 billion recorded a year ago.