The assembler and distributor of Nissan and Renault cars posted a wider net loss of RM15.72 million for the first quarter ended March 31, 2024 (Q1 FY2024) from RM5.07 million a year ago.
Quarterly revenue fell 9.06% to RM563.7 million from RM619.89 million a year earlier, Tan Chong said in a bourse filing on Friday. It declared a dividend of 1 sen per share for the quarter.
“Its Q1 losses more than doubled year-on-year as the sales volume of its bread-and-butter Nissan vehicles continued to fall,” said Kenanga Research in a note today.
It said the decline in Q1 revenue was on the back of a 14% contraction in Nissan vehicle sales to 2,145 units amidst a highly competitive environment where competitors flooded the market with new models. The group currently sells just three Nissan models – Almera Turbo, Serena and Navara.
The research house said the Q1 FY2024 losses were narrower than its forecast, due to favourable forex movements, but wider than market expectations.
Overseas losses
Kenanga also noted Tan Chong’s overseas operations remained mired in losses amidst a challenging operating environment.
“Its operation in Vietnam (10% of group revenue) recorded marginal sales of only RM2.2 million (-95%) and a higher loss of RM12.1 million (from loss of RM4.2 million in Q1 FY2023).
“Its other markets (Cambodia, Laos and Myanmar) recorded lower growth in sales (-21%), with a loss of RM0.6 million,” it added.
On a brighter note, its financial services revenue rose 7%, due to its highly competitive hire purchase scheme. There was also some contribution from its solar energy division, it said.
Tan Chong said its first floating large-scale solar photovoltaic plant in Serendah, Selangor, which commenced operation in January 2024, will contribute positively to its revenue stream.
Kenanga maintained its “underperform” call but raised its target price (TP) marginally to 74 sen from 72 sen previously as it forecasts narrower FY2024-25F losses.
It remains cautious on Tan Chong due to its “insignificant 1% share” of the total industry volume (TIV), and its lack of new launches while its competitors have successfully launched all-new models.
It also cited the group’s inability to raise prices to pass on rising production cost, especially with the weakening of the ringgit against the US dollar.
Falling on hard times
Tan Chong was founded by the late Tan Yuet Foh who set up a car distributorship in 1957 to realise his dream of building an automotive empire.
In the 1970s and early 1980s, the group was flying high as Nissan cars were a favourite of ordinary Malaysians. However, the group has since fallen on hard times as consumer preferences have shifted to other marques over the years.
The group has suffered losses for the last four financial years. For the year ended Dec 31, 2023 (FY2023), the group posted a wider net loss of RM128.74 million from RM51.11 million in FY2022.
Tan’s sons – Heng Chew, Eng Soon, and Eng Hwa – now control Tan Chong. Heng Chew, the group’s president, is the only sibling still on the board.
Interestingly, his son Anthony co-founded ride hailing giant Grab, which is listed on Nasdaq with a market capitalisation of US$14.47 billion (RM68 billion).
This dwarfs Tan Chong’s market cap of RM574.6 million based on its current share price of 86 sen.