Period 3Q12/9M12
Actual vs. Expectations
The 9M12 net profit came in slightly below expectations
and made up only 59% and 54% of ours and the consensus’ full year estimates of RM183.9m
and RM197.8m respectively.
Dividends No
dividend was declared for this quarter.
Key Results Highlights
QoQ, the 9M12 revenue slid by a marginal 5% from
RM985.4m to RM937.7m due to the waitand-see stance by consumers on the
anticipation then of car price reductions in the recent Budget 2013
announcement. The net profit dipped by 18% from RM42.3m to RM34.5m due to the fulfilment
of backlog orders in 2Q12 and a higher financing cost.
YoY, the 9M12 net
profit of RM107.6m came down by 42% on the back of a softer revenue of RM2,905.6m
(-2%) as the pre-tax margin dipped by 3.5ppt from 8.7% to 5.2% given the higher
promotional and marketing activities due to stiffer competition coupled with a
higher financing cost, which saw an increase of 59% from RM16.7m to RM26.4m.
Outlook We
reckon that Tan Chong should be able to post stronger numbers in 4Q12, which
will cushion its sales shortfall in the last three quarters. Its newly launched
Almera received an overwhelming response from the market with 7,000 bookings in
just 2 weeks post-launching.
Change to Forecasts We
have trimmed our FY12 net profit by 10.2% from RM183.8m to RM165.1m as we have lowered
our margin assumption for its vehicle assembly division as a result of the
higher marketing and distribution cost.
Rating Maintain MARKET PERFORM
We are maintaining
our MARKET PERFORM recommendation at this juncture as we expect a more meaningful
recovery to be felt only in FY13.
Valuation We
are maintaining our Target Price of RM4.36 based on a 10x PER on its FY13 EPS.
Risks Prolonged effect from the credit tightening measures.
Source: Kenanga
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