KUALA LUMPUR (Oct 2): An analyst said Tan Chong Motor Holdings Bhd’s memorandum of understanding (MoU) with PT SGMW Motor Indonesia to explore the introduction of the latter’s vehicle products in Malaysia and Thailand is a potential positive for the group.

"The potential brand expansion is a potential positive for Tan Chong, depending on the structure of the setup (whether completely built-up or completely knocked-down), model selection (passenger car- or commercial vehicle-focused) and the required capex," said MIDF Research analyst Hafriz Hezry in a note today.

However, he also noted that such a venture may require a “fair bit of” a gestation period given that the Wuling passenger car brand has had little visibility in the Malaysian auto market in the past.  

"In the near term, 3Q20 earnings (for the third quarter ended Sept 30, 2020) could be impacted by the run-out of the current-generation Almera as the launch of the new Almera is only expected this month. Additionally, the loss of Nissan distributorship in Vietnam is a drag on the group’s underutilised Danang plant, " he said, maintaining a "neutral" call for Tan Chong with an unchanged target price (TP) of RM1.

Tan Chong announced yesterday that it had teamed up with PT SGMW Motor Indonesia, a wholly-owned subsidiary of SAIC-GM-Wuling, to explore introducing the latter’s vehicles in Malaysia and Thailand.  

Tan Chong's share price was two sen or 1.96% higher at RM1.04 at 10.33am today, valuing the company at RM665.5 million.