CIMB Research downgrades Tan Chong, lowers target price to RM1.52

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KUALA LUMPUR (Dec 17): CIMB IB Research has downgraded Tan Chong Motor Holdings Bhd (TCM) from "add" to "hold" at RM1.44 with a lower target price of RM1.52 (previously RM1.90).

The research house also said it was negatively surprised by the termination of the group's joint venture with Nissan Motor Co Ltd in Vietnam, Nissan Vietnam Co Ltd from Sept 10, 2019.

TCM through its wholly-owned subsidiary, ECTM (V) Pte Ltd, has a 74% equity stake in the joint venture. CIMB sees "Vietnam as a key piece to the group's expansion strategy in Indochina".

In a note today, the research house said the discount in share price was reflective of TCM's earnings given the "lackluster growth prospects" in Indochina (excluding Vietnam).

"We downgrade TCM to 'hold' with a lower TP of RM1.52, now based on 11.2 times FY20F price-earnings ratio (P/E) (vs. 14 times previously), still 20% discount to our target sector P/E of 14 times.

"We believe the discount is reflective of TCM's earnings risk profile given the lackluster growth prospects in Indochina, after excluding Vietnam," it said.

This morning, TCM dipped 0.69% or 1 sen to RM1.43 with 11,000 shares traded.