Tan Chong Motor Holdings is currently facing serious challenges. The company’s share price plummeted to 70.5 sen, marking its lowest point since April 2004, following disappointing quarterly earnings that exceeded expectations for losses. This decline comes despite the company’s market capitalization standing at RM474 million.
On the same day, Hong Leong Investment Bank (HLIB) Research issued a “sell” recommendation on Tan Chong’s stock, expressing concerns about the company’s persistently weak sales performance despite worsening market conditions. Specifically, Nissan, a key brand under Tan Chong, has struggled recently. Once a steady fixture as Malaysia’s fifth-best-selling car brand, Nissan fell to ninth place last year, with only 10,000 units sold in 2023.
The company’s poor performance has continued into the current year. In the first half of 2024, Tan Chong reported only 4,811 units sold, a decline of 9.5% compared to the same period in 2023. Additionally, operating profits dropped by 27.3% year-on-year.
This slump has severely impacted the company’s financial results. Tan Chong Motor reported a core loss of RM30.8 million for the second quarter, increasing the total losses for the first half of the year to RM61.7 million, compared to RM55.9 million during the same period in 2023. HLIB Research has set a target price of 65 sen for the stock, based on an anticipated 2025 earnings forecast, indicating further potential declines.
The report also highlights concerns about Tan Chong’s competitive position in the domestic market, noting stiff competition from both local and international rivals offering appealing new models. Additionally, HLIB Research anticipates weak sales in Laos, Cambodia, and Myanmar due to declining consumer confidence and political instability.
However, there are some positive developments. In Vietnam, Tan Chong has begun distributing GAC vehicles, which could offset the impact of ending MG distributorship, despite a steep 89.9% drop in MG sales. In Malaysia, a recovery might be on the horizon with Nissan’s aging model lineup set to be revitalized in the fourth quarter, including the anticipated introduction of the new C28 Serena, rather than the Kicks.