KUALA LUMPUR (Aug 22): JF Apex Securities Reseach has maintained its “Hold” rating on Tan Chong Motor Holdings Bhd (TCM) with a lower target price of RM1.74 (from RM2) and said TCM extended its sluggish performance for second consecutive quarter after reporting another net loss of RM14.6 million in 2Q16 from RM37.2 million losses in last quarter and net earnings of RM14.16 million a year ago.

In a note today, the research house said TCM’s revenue stood at RM1374.02 million, decreased by 6.2% quarter-on-quarter while rose 8.7% year-on-year.

JF Apex said TCM’s reported RM51.8 million net loss in 1H16 significantly fell short of house FY16 net profit expectation of RM68.78 million and consensus RM52.3 million.

It said the lackluster result was mainly dented by challenging operating environment for automotive sector coupled with unfavourable exchange rates.

“We slashed our 2016F and 2017F earnings estimates by 92% and 40% respectively after significantly lowered down our car sales forecast for 2016/17F and margin as a result of continued higher CKD cost in relation to the weaker ringgit and higher marketing expenses.  

“In addition, the stubbornly stronger US dollar against ringgit is another threat to group’s bottomline as affecting its large component of CKD costs.

“Furthermore, the absence of new car model for Nissan in FY16-17(major new model will only be launched by 2018-19), as compared to ongoing new launches by both national and foreign competitors will continue to put the pressure on the group’s sales,” it said.