KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) remains cautious about Tan Chong Motor Holdings Bhd's domestic market outlook due to the stiff competition from the mass market segment.
In a report, the bank-backed research firm said Tan Chong recorded a disappointing net loss of RM7.1 million for the first quarter (Q1) ended March 31, 2022, due to deteriorated margins.
The drag was noticeably attributed to Malaysia's operation, which did not fully capitalise on the ongoing sales and service tax (SST) exemption and economic reopening, it said.
The firm anticipates that Tan Chong will launch the Nissan Kicks, X-Trail and Serena in the second half of 2022 (2H22).
"Given the disappointing result, we remain cautious on the company's domestic market outlook due to the ongoing stiff competition for the mass market segment.
"This is due to the attractive wide range of available models such as Honda City, Honda City Hatchback, Toyota Vios, Toyota Yaris, and Proton X50 competing in the same price segment of RM80,000-RM100,000," it said.
Meanwhile, HLIB Research said Tan Chong's new focus on the car subscription business model, which started in 2019, has continued to gain traction with a current fleet size of 2,953 units (from 1,780 units in 2020) under its own Renault Subscription platform and GoCar Subs platform.
Previously, Tan Chong had said that it would break even by the end of 2022 when the fleet size grew to 4,000 units.
"The new business is also introducing new services, GoEV to capture the adoption of electric vehicles (EV) in Malaysia and GoCar Garage.
"We maintain our Sell recommendation on Tan Chong with an unchanged target price of 75 sen," it added.