RHB Research ups target price for Tan Chong to RM4.60

KUALA LUMPUR (April 16): RHB Research Institute Sdn Bhd has maintained its Market Perform call on TAN CHONG MOTOR HOLDINGS BHD [] (TCM) and lift our fair value to RM4.60 (from RM4.20), and said Tan Chong will likely report relatively weak 1Q earnings after MAA data for the first two months of 2012 showed combined Nissan and Renault sales down 16.7% year-on-year, attributed to a combination of component supply constraints and the newly-introduced responsible lending guidelines.

The research house said in a note Monday that Nissan Vietnam (NVL) was likely to remain loss making in 2012 although Indo-China continues to hold long-term promise given their large populations and growing middle class.

“TCM’s Danang assembly plant is now expected to commence production in Jan 2013 that will help to lower selling prices. Nissan’s B-segment competitor the Almera is scheduled for a Sep launch with initial CKD production already begun,” it said.

Further out, there are plans to reintroduce the Datsun brand into the local market with an A-segment model scheduled for 2014 that could be priced in the sub-RM60k bracket, it said.

“We reiterate our Market Perform call on Tan Chong and lift our fair value to RM4.60 (from RM4.20), derived from applying a 13x (from 10x) target PER to revised 2012 earnings,” it said.



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Stocks to Watch Axis REIT, K-One Tech, IOI, Tan Chong, TNB

KUALA LUMPUR (April 12): Malaysian stocks could take the cue from China's first quarter gross domestic product (GDP) numbers, and the US corporate earnings dynamics on Friday.

Against the backdrop of external uncertainties, analysts cautioned that the FBM KLCI could see limited gains in the absence of domestic catalysts. The FBM KLCI rose 4.1 points to close at 1,601.27 on Thursday.

Stocks to watch on Friday include Axis Real Estate Investment Trust, K-ONE TECHNOLOGY [] BHD [], IOI Corp Bhd, TAN CHONG MOTOR HOLDINGS BHD [], and TENAGA NASIONAL BHD [] (TNB).

Axis REIT plans to acquire land within Negeri Sembilan's Nilai Industrial Area for RM26.5 million. The leasehold sites will be acquired from LRS Property Sdn Bhd, according to the acquirer.

K-One Tech, an electronic systems manufacturer, said one of its three factories in Ipoh was gutted by fire on Tuesday afternoon. The damaged is estimated at RM13 million, it said.

IOI's 30.4% associate Bumitama Agri Ltd rose as much as 36% on the PLANTATION [] firm's debut on the Singapore bourse on Thursday. Bumitama shares added 27 Singapore cents to an intraday high of S$1.02 (RM2.49) before closing lower at 98 Singapore cents.

CIMB Investment Bank has raised its fair value for Tan Chong from RM4.60 to RM4.75 with a "Neutral" recommendation.

TNB's second quarter net profit rose more than four fold from a year earlier, as a RM2.02 billion fuel-cost compensation from the government and Petroliam Nasional Bhd (Petronas) mitigated the impact of costlier fuel to the state-owned utility's profits.

TNB said its bottom line was also helped by higher electricity sales and foreign exchange translation gains. It said net profit came in at RM2.82 billion in the second quarter ended Feb 29, 2012 against RM641.1 million a year earlier as revenue grew 17% to RM8.63 billion from RM7.37 billion.



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CIMB Research maintains Neutral on Tan Chong, ups target price to RM4.75

KUALA LUMPUR (April 12): CIMB Research has maintained its Neutral Recommendation on Tan Chong Motor Holdings Bhd and said the key takeaways from its lunch meeting with Tan Chong’s management were 1) 1Q12 results could be weak, 2) assembly operations in Segambut could be halted as early as 2017, and 3) Tan Chong aims to triple vehicle sales during 2012-16.

In a note Thursday, CIMB Research said it was raising its target price for Tan Chong to RM4.75 from RM4.49.

“We retain our earnings estimates but raise our SOP-based target price for a higher target P/E of 9.4x (prev. 9.1x), still pegged to a 30% discount to our KLCI target P/E which has been raised to 13x from 12.6x. Maintain Neutral.

“We like DRB-Hicom for exposure to the auto sector,” it said.



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Maybank IB Research upgrades Tan Chong to Buy

KUALA LUMPUR (April 6): Maybank Investment Bank Bhd Research has upgraded TAN CHONG MOTOR HOLDINGS BHD [] to a Buy with a revised target price of RM5.38, ahead of an anticipated sector recovery in 2H 2012.

In a note Friday, the research house said that this followed a 17-18% rise in 2012-13 net profit forecasts, on higher vehicle sales assumptions (+9-21%).

“We reckon the disruption to the regional parts supply chain, margin weakness and poor Jan-Mar 2012 performance have all been priced in. Our TP (+35%), premised on 10x 2013 PER (previously 8x), offers 20% upside.

“Our re-rated PER target reflects improved optimism ahead,” it said.



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HDBSVR sees investors taking profit after Wall St fall

KUALA LUMPUR (March 7): HwangDBS Vickers Research said the overnight fall on Wall Street, where the key indices plunged between 1.4% and 1.6% at the closing bell, could provide the excuse of local investors to take profit on Wednesday.

Wall Street fell on fears that disagreements by some private bond holders might derail Greece’s debt-swap deal, which in turn could scuttle the bailout programme for the financially-ailing country.

“This will likely provide an excuse for investors to take profit on our local bourse today. Its benchmark FBM KLCI – after rebounding from an intra-day low of 1,580.51 yesterday – may test and break below the immediate support line of 1,580 ahead,” it said.

HDBSVR said that hoping to buck the weak market pattern on Wednesday are counters like: (a) Dijaya Corporation, which has proposed to acquire property assets privately owned by its major shareholder (for RM949 million) as well as to undertake a fund-raising exercise (comprising both rights issue and debt financing); (b) Tan Chong, after being appointed to be the contract assembler for Subaru passenger cars; and (c) SapuraCrest Petroleum, as it has been awarded an oil & gas contract worth RM162 million.



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TC Subaru picks Tan Chong Motors to assemble vehicles

KUALA LUMPUR (March 6): Tan Chong Motor Assemblies Sdn Bhd has been appointed by TC Subaru Sdn Bhd as its contract assembler to assemble passenger vehicles.

The agreement is effective Tuesday until Dec 31, 2013, TAN CHONG MOTOR HOLDINGS BHD [] said in a statement.

Tan Chong Motor Assemblies is a 70 per cent-owned subsidiary of Tan Chong Motor Holdings while TC Subaru is a subsidiary of Tan Chong International.

"The appointment would enable Tan Chong Motor Assemblies to utilise the production capacity of its assembly plants at an optimum level.

"Based on the forecast assembly units during the term, the expected total assembly charges and related localisation fees payable by TC Subaru to Tan Chong Motor Assemblies is estimated at RM30.22 million," it said. - Bernama



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Tan Chong opens UD Trucks 3S in Ipoh

Tan Chong Industrial Equipment Sdn Bhd (TCIE), the sole distributor of UD Trucks in the country, has opened its first corporate identity UD Trucks 3S (sales, service and spare parts) centre in Malaysia, in Klebang here.

The RM8 million centre will serve the transportation needs of TCIE's customers in Perak and the Northern region. TCIE executive director Tan Keng Meng said the 3S centre would give the company a competitive edge in the Northern region, adding it expects to enjoy double-digit growth in sales of UD Trucks this year.

"The establishment of the new 3S centre further reaffirms the company's commitment and promise to their existing and potential customers to continously improve on their offering of quality products and services," he said in his speech at the opening of the centre today.

The centre was officially opened by Volvo Malaysia Sdn Bhd managing director Mansoor Ahmed. Tan said the centre would cater to TCIE's future business growth and expansion, and incorporate 16 service bays catering to about 26 Light and Heavy vehicles.

He said the company had also invested about RM1.2 million in new
state-of-the-art workshop equipment and tooling to ensure speedy quality servicing of vehicles for existing and potential customers.

The new facility offers extended hours and 24-hour breakdown support services. Moving forward, Tan said TCIE is exploring to expand the UD Trucks 3S centre network to Butterworth, Melaka and possibly in the East Coast in efforts to uplift the level of its services.

On the performance of trucking and bus industry in Malaysia, Tan said it sustained a marginal growth rate of almost three per cent last year with registered vehicle sales of 12,374 units compared to 12,018 units in 2010.

He said industry growth in the Northern region (covering Perlis, Penang, Kedah and Perak) remained constant, accounting for about 13.5 per cent of overall share market nationwide, with registered sales of 1,716 vehicles last year.

TCIE posted positive growth of 17 per cent for overall sales of its UD Trucks light commercial vehicles, heavy commercial vehicles and buses last year. -- Bernama



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Credit crunch and weakening ringgit negative for automobile sector

Automotive sector
Maintain negative: December’s total industry volume (TIV) dropped by 12.9% year-on-year (y-o-y) and 2% month-on-month (m-o-m) to 47,708 units. The lower sales in December were attributed to the floods in Thailand and seasonal factors. The Malaysian Automotive Association (MAA) guided that January 2012 vehicle sales should improve slightly given ongoing promotional campaigns and the rush to deliver new vehicles ahead of the Chinese New Year holidays.

In 2011, Perodua continued to maintain the top spot with a market share of 30% against Proton’s 26.4%. In the non-national vehicle segment, Toyota remained resilient with a 14.8% market share. However, the back-to-back disasters narrowed the market share gap between Honda and Nissan. The top three Japanese marques ended FY11 with only 25.6% market share of TIV down from 28.3% in FY10.

We anticipate vehicle sales to benefit from a pent-up demand after last year’s two major disasters. However, there are several potential dampeners for the auto industry: (i) The uncertain global economic outlook could dent consumer confidence and they would turn cautious on spending on big-ticket items such as cars.

(ii) A more stringent auto financing loan approval process and credit control. Bank Negara Malaysia imposed a new ruling on credit standards late last year. Banks are now required to assess loan applications based on the net income instead of the gross income of the borrower. About 70% of hire purchase loan applications have been rejected since the new ruling came into place. This would likely affect consumers within the low to middle income bracket, while mid-range Japanese and South Korean makes could be the hardest hit. Second-hand vehicle prices are expected to fall as the car sellers will offer discounts given the stricter credit financing conditions.



(iii) The weakening of the ringgit against the yen and US dollar could add cost pressure in terms of rising raw material prices and potentially higher completely-knocked down (CKD) costs. Among local stocks, the biggest exposure to the greenback over the yen is Tan Chong Motor Holdings Bhd with as much as 70% of its imports in US dollars. UMW Toyota Motor Sdn Bhd’s imports are mostly priced in dollars and its 38% associate Perusahaan Otomobil Kedua Sdn Bhd (Perodua) imports in yen. MBM Resources Bhd has no direct exposure to yen except via its 20% associate Perodua. Proton Holdings Bhd has about 7% exposure to the greenback via imported CKD content in its Inspira model.

We continue to maintain our 2012 TIV forecast of 611,140 units, lower than MAA’s 615,000 as we expect more severe repercussions for TIV from tighter credit conditions.

We reiterate our “negative” recommendation for the automotive sector. Under our coverage, we have only a “buy” on MBM Resources (target price: RM3.60 — under review) backed by its current low valuation among its peers. We maintain “neutral” on Tan Chong (TP: RM4.50), UMW (TP: RM6.90) and Proton (TP: RM5.50). — MIDF Research, Jan 31


This article appeared in The Edge Financial Daily, February 2, 2012.



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Automotive sector riding through a rough patch

Automotive sector
Maintain underweight: Total industry volume (TIV) for 2011 of 600,308 units (+0.4% year-on-year [y-o-y]) with sequentially softer December sales (-2% month-on-month [m-o-m]) met our and street expectations.

We expect auto sales growth to be uninspiring at 1% to 2% in 2012 as domestic automotive demand nears saturation.

Margin pressure is expected to set in on unfavourable exchange rates coupled with price discounting among players to regain market share post the Thai floods. In the absence of an immediate catalyst, the auto sector remains an “underweight”. Hold UMW Holdings Bhd and MBM Resources Bhd, “sell” Tan Chong Motor Holdings Bhd.

Auto sales contracted 2% m-o-m to 47,708 units in December, in line with consensus expectations. The non-national marques were the major losers in December as sales fell 13% m-o-m to 18,684 units, while national models fared better (+7% m-o-m to 29,024 units).

Honda’s sales were the hardest hit among the major marques; sales fell 66% m-o-m to a mere 635 units in December. Honda’s plants in Malacca and Thailand were badly affected by the flood situation in Thailand.


Toyota’s sales were also affected (-30% m-o-m to 5,614 units), followed by Proton (-4% m-o-m to 10,812 units). Conversely, Perodua and Nissan reported higher sales in December, up 14% and 1% on a monthly basis respectively.

We expect auto companies to report poor January to March 2012 sales figures, as they absorb the adverse effects of the disrupted supply chain.

With production everywhere still at sub-par levels, the majority of distributors will be reliant on fast-depleting inventories to support sales commitments.

Margins will be under pressure, crimped by the rise in completely-knocked-down (CKD) component costs on the stronger US dollar and yen against the ringgit.

The tightening in hire purchase (HP) financing will impact auto sales, as lenders become more cautious due to the recent uptick in non-performing HP loans.

Against this backdrop, we are keeping our 2012 TIV forecast of 1% to 2% growth unchanged. Overall, Perodua is set to retain its position as the best-selling marque, attributable to consumer preference for smaller autos (market share: 34.7% at end-October 2011).

Passenger vehicles in the compact car category (Myvi and Saga) will continue to dominate sales volumes. We see growth potential for hybrid and electric cars, which currently account for 1.2% of TIV, as exemptions from import and excise duties (effective until December 2013) make them more affordable. — Maybank IB Research, Jan 18


This article appeared in The Edge Financial Daily, January 19, 2012.



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Tan Chong denies bidding for Proton stake

KUALA LUMPUR: Tan Chong Motor Holdings Bhd yesterday denied that it was joining the race to bid for Khazanah Nasional Bhd’s 42.7% stake in national carmaker Proton Holdings Bhd.

Tan Chong’s announcement to Bursa Malaysia yesterday was made in response to press reports that quoted a AmResearch report on the matter.

AmResearch’s report on Tuesday said Tan Chong has been invited to submit its bid and is working on a proposal to buy the strategic stake in Proton.

But yesterday, Tan Chong’s board announced that it “has neither received any formal invitation nor has any plan to bid for the stake in the national carmaker Proton Holdings Bhd”.

Tan Chong, which distributes Nissan and Renault cars, was cast by AmResearch as a dark horse in the race for the strategic stake in Proton.

Other suitors for Proton include its chairman Datuk Seri Mohd Nadzmi Mohd Salleh, tycoon Tan Sri Syed Mokhtar Al-Bukhary’s DRB-Hicom Bhd and the Naza group.

The Edge weekly recently reported that businessman Tan Sri Arumugam Apavoo Packiri and Genii Capital’s Gerald Lopez could submit a joint bid for the 42.7% block in Proton.

On the back of the news, Tan Chong shares gained 11 sen yesterday to close at RM4.29 on a thin volume of 17,500 shares. Proton rose three sen to RM5.28 with 4.84 million shares traded.


This article appeared in The Edge Financial Daily, January 12, 2012.




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KLCI struggles to extend gains as external concerns persist

KUALA LUMPUR (Jan 12): The FBM KLCI struggled to stay in positive territory at mid-morning on Thursday as key regional markets traded mixed following the softer overnight close at Wall Street.

Asian shares were subdued and the euro hovered near a 16-month low on Thursday as worries about euro zone sovereign funding kept investors risk-averse ahead of a Spanish debt sale that is seen as a key test of confidence, according to Reuters.

The FBM KLCI edged up 0.17 of a point at mid-morning.

Gainers led losers by 221 to 197, while 238 counters traded unchanged. Volume was 333.23 million shares valued at RM251.65 million.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note Thursday said the FBM KLCI’s resistance areas of 1,524 and 1,535 may cap market gains, whilst obvious support areas may be located at 1,500 and 1,522.

“Due to the US markets’ quiet tone last night; we could be in for yet another benign day of trading activity,” he said.

At the regional markets, Japan’s Nikkei 225 slipped 0.71% to 8,388.11, Hong Kong’s Hang Seng Index shed 0.14% to 19,124.80, South Korea’s Kospi lost 0.28% to 1,840.38 and Singapore’s Straits Times Index was down 0.16% to 2,742.66.

Meanwhile, the Shanghai Composite Index added 0.07% to 2,277.65 and Taiwan’s Taiex rose 0.08% to 7,194.15.

On Bursa Malaysia, Pos Malaysia was the top gainer at mid-morning and added 14 sen to RM2.71; Kulim added 10 sen to RM4.41, Can-One, Proton and CBIP rose nine sen each to RM1.74, RM5.37 and RM4.84, Jetson and Genting eight sen each to RM1.32 and RM10.84, Ann Joo seven sen to RM1.87 and Sarawak PLANTATION []s six sen to RM2.60.

Among the decliners, Ta Ann fell 40 sen to RM5.20, KLK down 12 sen to RM24.58, Tan Chong nine sen to RM4.20, Shell and Top Glove down seven sen each to RM9.43 and RM5.18, NCB, Ewein and Kossan down six sen each to RM3.86, 79 sen and RM3.51 respectively, while NSOP fell five sen to RM5.55.

The actives included Pos, Proton, OSK, RedTone, Hibiscus and Envair.



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Tan Chong falls on Proton stake denial

Tan Chong Motor Holdings Bhd, a Malaysian car assembler and distributor, fell the most in almost a month in Kuala Lumpur trading after saying it has no plans to buy a controlling stake in Proton Holdings Bhd.

The stock lost 2.1 percent to RM4.20 at 9:30 a.m. local time, set for the steepest decline since Dec. 16.

Proton gained 2.5 percent to RM5.41. -- Bloomberg



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Stocks to watch: Takaso, CIMB, Tan Chong, Supermax, Hibiscus

KUALA LUMPUR (Jan 12): Stocks on Bursa Malaysia could see some downside bias on Thursday following the weaker macroeconomic issues from its weaker exports outlook and also the troubled eurozone.

RHB Research Institute said on Wednesday it expected Malaysia’s export growth to slow down sharply in 2012 as the global economy will likely experience a protracted slow growth and downside risks remain.

“Indeed, the latest economic data releases suggest that the Eurozone economy might have fallen into a contraction and the US economic growth, though improving, is likely to remain in a low gear,” it said.

Malaysia recorded RM56.86 billion in exports in November 2011, up 8% on-year but when compared to the previous month of October, it fell 10.2%.

Imports for the month were RM47.38 billion, up 8.4% on-year but declined 5.3% on-month.

In its analysis of the November trade data, RHB Research said the 8% on-year export growth in November was the lowest in four months, after holding up at +15.8% in October and off a 15-month high of +16.6% in September.

“This was below the median estimate of an easing to +12.9%, on the back of sliding exports of commodity products as well as a weaker growth in the exports of non-electronic & electrical (E&E) manufactured goods during the month. A smaller contraction in the exports of E&E products, however, helped to mitigate this,” it said.

On the external front, the head of sovereign ratings for Fitch, David Riley warned that the European Central Bank should ramp up its buying of troubled euro zone debt to support Italy and prevent a "cataclysmic" collapse of the euro, , said on Wednesday.

Riley said the collapse of the euro would be disastrous for the global economy, and while it is not Fitch's baseline scenario, it could happen if Italy did not find a way of its debt problems.

"The end of the euro would be cataclysmic. The euro is a reserve currency," Riley said. "What would that do in terms of financial and political stability?"

At Bursa Malaysia, among the stocks to watch are TAKASO RESOURCES BHD [], CIMB Group Holdings Bhd, TAN CHONG MOTOR HOLDINGS BHD [], SUPERMAX CORPORATION BHD [] and Hibiscus Petroleum Bhd.

Takaso, whose shares have been actively traded recently over a proposed timber concession, is set to seal an agreement with Kayumas PLANTATION [] Ltd on Thursday.

The agreement will enable Takaso to diversify and tap into Kayumas’ resources, including its concession and a timber licence. Kayumas also has the logging rights for 40,000 ha of timber in Papua New Guinea.

Philippine conglomerate San Miguel Corp is finalising a deal to sell 60% of its banking arm, Bank of Commerce, to the CIMB Group,.

Reuters said a share-transfer agreement was now being reviewed by the groups involved, the source, who was not authorised to speak to the media about the matter and thus did not want to be identified, told Reuters.

CIMB had said in October it was in early talks to acquire a stake in Bank of Commerce from San Miguel group.

Reuters said Bank of Commerce, with total assets of $2 billion, has capital stock of 16.96 billion pesos (US$385.5 million) as of June 2011, latest bank filings with the central bank show. Based on this data, a sale of a 60% stake in the bank could be worth US$231.3 million.

Tan Chong Motor Holdings had categorically stated it does not plan to acquire a stake in PROTON HOLDINGS BHD [].

It said that it “has neither received any formal invitation nor has any plan to bid for the stake in the national carmaker, Proton”.

Meanwhile, there could be some intermittent profit taking on glove makers after the strong run on Wednesday, if market sentiment weakens.

Supermax expects to record between RM100 million and RM110 million in profit after tax for the financial year ended Dec 31, 2011.

Its executive chairman Datuk Seri Stanley Thai said he also expected RM1 billion in sales in FY11.

For the nine-months ended Sept 30, FY11, Supermax reported RM77.86 million earnings on the turnover of RM750.70 million.

Hibiscus has come under some selling pressure on the back of rising trading volume after the run-up earlier this month. Its shares fell 16 sen to RM1.02 with 31.51 million units done while the warrants fell 2.5 sen to 61 sen with 27.69 million warrants done.



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Tan Chong Motors: No bid for Proton stake

KUALA LUMPUR (Jan 11): TAN CHONG MOTOR HOLDINGS BHD [] says it does not plan to acquire a stake in PROTON HOLDINGS BHD [].

In a statement to Bursa Malaysia on Wednesday, it said that it “has neither received any formal invitation nor has any plan to bid for the stake in the national carmaker, Proton”.

It was responding to a query from Bursa Malaysia Securities over a news report that it was drawaing up a proposal to bid for Proton.

Proton has been in the news that several suitors are keen on Khazanah Nasional’s 42.7% stake in the national car maker.

Earlier on Wednesday, UMW HOLDINGS BHD [] group chairman Tan Sri Asmat Kamaludin said UMW had no plans to acquire Khazanah’s stake in Proton.

He said UMW wanted to focus on its current commitments, including its partnership with Toyota and Perodua.

However, DRB-HICOM BHD [] had on Monday confirmed it has submitted a bid to acquire Khazanah’s stake and it was awaiting a decision by Khazanah.

DRB-Hicom said it had always viewed Proton as an important automotive industry player.



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Stocks to watch: Kulim, QSR, SapuraCrest, Can-One

KUALA LUMPUR (Jan 11): The firmer overnight close on Wall Street could provide the much-needed boost for regional markets and Malaysia while fresh corporate developments could see trading interest in stocks like KULIM (M) BHD [] and QSR BRANDS BHD [].

Stocks which could see trading interest on Wednesday include Kulim (M) Bhd and QSR Brands Bhd following a slightly higher offer price made by Kumpulan Syarikat Pelaburan DPMM on behalf of the Malay Chamber of Commerce Malaysia (MCCM).

The MCCM raised the offer for the QSR shares owned by Kulim by 10 sen to RM6.90. However, could this lead to other offers in the pipeline?

At RM6.90, this was 10 sen above the offer made by Massive Equity Sdn Bhd (MESB) to acquire QSR’s business and undertakings, including substantially all the assets and liabilities of QSR for RM6.80 per share.

Meanwhile, SAPURACREST PETROLEUM BHD []’s joint venture has secured a subsea CONSTRUCTION [] project worth RM315 million (US$100 million) offshore Vietnam.

SapuraAcergy Sdn Bhd, which is 50:50 owned by SapuraCrest and Subsea 7 S.A. was awarded the contract, adding that the offshore work was expected to be performed in mid 2012.

CAN-ONE BHD [] stated it was unaware of any plan of its major shareholders to undertake a privatisation or merger with KIAN JOO CAN FACTORY BHD [].

PETRA ENERGY BHD []’s former chairman Tengku Datuk Ibrahim Petra Tengku Indra Petra is seeking RM891,000 as gratuity payment from the company and the transfer of a company car.

The Kuok Group continued to reduce its stake in HEXAGON HOLDINGS BHD []. It disposed of 7.69 million shares at an average price of 20 sen from Jan 4 to 9 and reduced its stake to 9.78% or 12.978 million shares.

Another stock which could see trading interest is Tan Chong Motor on speculation it might be keen in a stake in Proton.



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Tan Chong gets exclusive SYM distributorship in Laos

KUALA LUMPUR: Tan Chong Motor Holdings Bhd (TCMH) has won a three-year exclusive distributorship for SYM motorcycles in Laos where it expects to sell 12,200 units in the first three years of operations.

In a statement to Bursa Malaysia yesterday, TCMH said its wholly-owned subsidiary Tan Chong Motorcycles (Laos) Co Ltd (TCML) had been appointed by Vietnam Manufacturing and Export Processing Co Ltd (VMEP) to be the exclusive distributor, importer and after-sales service provider for all SYM motorcycles in Laos.

The distribution of SYM motorcycles in Laos is expected to commence in the first half of 2012 with showrooms set up in Savan-Seno Special Economic Zone and Vientiane, it said. The three-year agreement effective Monday is renewable with written consent from both parties.

An established motorcycle manufacturer in Vietnam with over 230 authorised sales and service centres in Vietnam, VMEP is wholly-owned by Hong Kong-listed VMEP Holdings Ltd, a subsidiary of Taiwan-listed Sanyang Industry Co Ltd.

Incorporated on Dec 9, 2010 in Vietnam, TCML is licensed to undertake the assembly of SYM motorcycles for domestic sale and export. TCML is also licensed to import “spare parts of motorcycles and all types of vehicles in Laos”.

TCMH expects the distributorship to boost group earnings “in the long term” but would not materially affect numbers for FY ending Dec 31, 2012.



This article appeared in The Edge Financial Daily, January 4, 2012.




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Maybank IB Research maintains underweight on automotive sector

KUALA LUMPUR (Dec 20): Maybank IB Research is maintaining its underweight recommendation on the automotive sector.

“We retain our Hold calls on UMW and MBM while Tan Chong Motor remains a Sell,” it said on Tuesday.

Maybank Research said the sequentially weaker November's total industry volume of 48,702 units (down 9% on-month) was expected and the 11-month vehicles sales of 552,600 units (up 0.4% on-year; 92% of full-year estimates) was on track to meet its 2011 forecast.

“We expect a challenging 2012, on muted +1% to 2% on-year growth. 1Q12 sales will be weak, dampened by distribution issues post Thai flood aftermath. Margin pressure will be a likely drag to profits, on dearer component costs (stronger Yen and USD against RM) and higher A&P costs. In light of this, the sector remains an Underweight,” it said.



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S&P warning on Europe dampens Asian investor sentiment

KUALA LUMPUR (Dec 6): Asian markets fell on Tuesday ahead of a crucial eurozone summit this weekend as investor confidence was sapped by the possibility of a widespread credit rating downgrade affecting European nations.

Ratings agency Standard & Poor's late Monday warned it might downgrade euro zone countries en masse, piling pressure on European leaders ahead of a summit later this week, according to Reuters.

The unprecedented warning brought to a halt a rally in global equities that began last week and had continued on Monday, when the leaders of France and Germany agreed a plan aimed at guiding the region out of its two-year-old debt crisis, it said.

The FBM KLCI fell 10.17 points to 1,479.78 at 10am, weighed by losses at blue chip stocks.

Losers led gainers by 256 to 128, while 205 counters traded unchanged. Volume was 596.97 million shares valued at RM239.19 million.

At the regional markets, Japan’s Nikkei 225 lost 0.77% to 8,628.60, Hong Kong’s Hang Seng Index fell 0.86% to 19,015.14, the Shanghai Composite Index was down 0.15% to 2,329.63, Taiwan’s Taiex lost 1.09% to 7,020.98, South Korea’s Kospi fell 0.87% to 1,906.25 and Singapore’s Straits Times Index shed 0.52% to 2,751.72.

On Bursa Malaysia, the top losers included BAT that fell 56 sen to RM47.54, KLK down 38 sen to RM21.60, Petronas Dagangan 22 sen to RM16.98, Hong Leong Bank 16 sen to RM10.68, Lafarge Malayan Cement 12 sen to RM6.63, UMW 11 sen to RM6.60 while Batu Kawan, Sime Darby and MISC fell 10 sen each to RM17, RM8.88 and RM6.02.

Among the gainers at mid-morning, Orient added 23 sen to RM4.71, United PLANTATION []s 14 sen to RM18.50, Proton 12 sen to RM4.62, Tan Chong 10 sen to RM4.28, QSR, CBIP and Latexx nine sen each to RM6.05, RM4.72 and RM1.97, while APM added seven sen to RM4.42.

The actives included Compugates, Sanichi, Proton warrants, DRB-Hicom warrants and Utopia.



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Stocks to watch: Investors’ eyes on Europe

KUALA LUMPUR: Key regional markets, including Bursa Malaysia, will focus on the make-or-break European Union summit this Friday where EU leaders will discuss more measures to resolve the debt crisis.

Ahead of the summit, the leaders of France and Germany are expected to meet today to hammer out a framework to put forward to the summit if more aggressive steps are needed and how to leverage the eurozone’s bailout fund.

Last Friday, the FBM KLCI closed in positive territory as some key regional markets reversed their earlier losses, but gains remained muted as investor sentiment stayed cautious.

Week-on-week, the KLCI was up 57.45 points to end at 1,489, touching the key 1,500 briefly. Market capitalisation increased by RM39.59 billion to RM1,269.59 billion.

Dr Nazri Khan, Affin Investment Bank head of retail research, said while short-term momentum might be slightly overbought, the KLCI has possibly priced in all the potential negative news it needs to digest.

“As for technicals, we see the bulls having the upper hand with all oscillators pointing up accompanied by heavy trading volume [KLCI rallied more than 30 points in a single daily session last week suggesting strong buyers underneath].

“The next upside resistance should come in at the 200-day moving average of 1,500 followed by the 2008 high near 1,530 points. Short-term supports, meanwhile, are seen at last week’s low near 1,440 followed by November’s low near 1,420,” he said.

As for the just ended quarterly corporate results, UOB Kay Hian Malaysia Research said 3Q results were largely within expectations and advised investors to accumulate on weakness.

“The first quarter of 2012 should present thematic plays like election and Economic Transformation Programme (ETP) beneficiaries,” it said.

UOB Kay Hian Research said its current top stock picks include Sime Darby Bhd and Telekom Malaysia Bhd. For 1Q12, it expects ETP beneficiaries to outperform, including Gamuda Bhd, Malaysian Resources Corp Bhd (MRCB) and UEM Land.

“We expect oil and gas stocks to come into play with the award of Petroliam Nasional Bhd’s (Petronas) risk sharing contracts. Proton is also on our radar now, as a beneficiary of government-linked company (GLC) mergers and acquisition activities,” it said.

RHB Research Institute believes local equities will still be held hostage to external developments. It pointed out concerns over the eurozone economy and the immense challenges likely to keep markets on a volatile trajectory in the foreseeable future.

“While global equities have priced in a lot of bad news on the euro debt crisis as well as macroeconomic uncertainty in the US and China, investors’ risk perceptions can still change very quickly should the situation turn out to be worse than expected,” it said.

RHB Research revised its end-2011 KLCI target back to 1,450, based on 14 times 2012 earnings per share, although it views that the market will likely be range bound between 1,450 and 1,550 points.

Among the stocks which could see trading interest are Glomac Bhd, Mah Sing Group Bhd, Tan Chong Motor Holdings Bhd and Fibon Bhd.

Glomac’s net profit for 2QFY12 ended Oct 31, 2011 rose 50% to RM23.78 million from RM15.88 million a year ago, underpinned by ongoing projects particularly Glomac Damansara, Glomac Cyberjaya, Saujana Rawang and Bandar Saujana Utama.

Its revenue for the quarter, however, declined 4.3% to RM134.83 million from RM140.89 million, due to the completion of two projects, Glomac Tower and Glomac Galleria.

Mah Sing’s proposed joint development of 4.08 acres of prime land in Jalan Tun Razak/Jalan Pahang, Kuala Lumpur, received a setback when the conditions were not met. However, Mah Sing said it would explore options to move ahead on this.

The project is a niche development, M Sentral, with an estimated gross development value of RM900 million. It is part of the RM9 billion, 58-acre riverside urban regeneration project.

The Edge weekly reported that Tan Chong Motor Holdings Bhd, which invested nearly US$45 million (RM141 million) in Nissan Vietnam Co Ltd since acquiring a controlling stake in the company last year, is optimistic that it will reach breakeven earlier than anticipated.

Fibon, a chemical compounds producer, is poised to enter a new phase of growth with the upcoming launch of its new switchboard Fibon LogiCube.


This article appeared in The Edge Financial Daily, December 5, 2011.



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Bullish sentiment on Bursa set to continue

KUALA LUMPUR: Stocks are expected to continue to trade higher this week, with the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI) trying to break the psychological 1,500 mark for the first time in more than three months.

The overall improving sentiments are mainly driven by a coordinated move by major central banks to ease Europe's debt crisis, the greater clarity provided by European policy makers on plans to stabilise the debt situation, as well as encouraging economic data from the US.

Meanwhile, closer at home, speculation of DRB-HICOM Bhd's possible acquisition of major stakes in Proton Holdings Bhd, possible mergers between ECM Libra Financial Group and K&N Kenanga Holdings, as well as Petronas' plans to build its third natural gas terminal in Lumut, will keep investors excited for the week.

"Investors' confidence has significantly improved over the past few trading days, and is expected to stay strong over the near term. This may be the beginning of a year-end rally," said a head of research from a local brokerage.

Analysts expect the immediate resistance level for the benchmark index at about 1,500 level, while the near-term support level is around the 1,470 level.

The FBM KLCI ended four consecutive weeks of losses with a 4.01 per cent gain last week at 1,489.02. It was also the index's highest weekly gain since July 2009.

Last week, the entire market capitalisation of the stock market rose by some RM30 billion to RM1.27 trillion, from RM1.24 trillion the week before.

The gains were partly driven by improving sentiments among foreign fund managers, who boughtalmost RM3 billion and sold RM1.76 billion worth of stocks, resul-ting in a net buying of more than RM1.17 billion.

Last week, the US Federal Reserve and five other central banks lowered the cost of dollar funding to ease Europe's debt crisis, while China reduced the amount of cash that banks must set aside as reserves for the first time since 2008. The reserve ratios will decline by 50 basis points starting today.

Meanwhile, data revealed that payroll gains in the US improved last month, and jobless rate was down to 8.6 per cent, its lowest level since March 2009.

This week, stocks that will be in investors' radar, among others, include Proton and DRB-HICOM on speculation of possible corpo-rate exercise; Glomac Bhd on its 50 per cent jump in second quarter net profit; as well as Tan Chong Motor Holdings Bhd, which a weekly publication reported that its Vietnam venture may reach break-even earlier than expected.



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