KUALA LUMPUR: Tan Chong Motor Holdings Bhd (Tan Chong) may need fresh catalyst to return to profitability as its overall sales are still weak, despite launching the all-new Nissan Almera in November last year.
Kenanga Research analyst Wan Mustaqim Wan Ab Aziz said it was still uncertain presently whether the Almera would prove to be the fresh catalyst needed for Tan Chong to return to profitability and offset the negative impact from its under-utilised Danang plant in Vietnam.
This followed by the expiration of both completely built-up (CBU) and complete-knocked down (CKD) agreements in Vietnam with its principal on September 30, 2020 and September 19, 2020 respectively.
"We maintain an underperform call with a target price of RM1.00. Key risks to our call include favourable sales mix and better-than-expected car sales margin," Wan Mustaqim said.
Tan Chong's net loss widened to RM44.2 million in the third quarter (Q3) ended September 30, 2021 from a net loss of RM7.33 million incurred previously as the group's business in Malaysia and the region was affected by lockdown during the period to contain the Covid-19 virus.
Its Q3 revenue plunged 54.5 per cent to RM439.28 million from RM964.54 million due to lower contribution from the automotive division and financial services.
For the cumulative nine-month period, the group's net loss narrowed to RM58.68 million from RM95.96 million, despite posting a lower revenue at RM1.67 billion from RM2.21 billion.
This was mainly attributed to better sales mix, lower operating expenses, lower impairment on hire purchase receivables and higher unrealised foreign exchange gain.
Kenanga Research said the results were within its expectation but it expected Tan Chong to record better sales in the fourth quarter of its financial year 2021.
"This will be underpinned by the re-opening of sales outlets and production as well as inter-state travel."
However, the research house said the overall outlook remained unexciting with only one popular new model to drive volume.