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Monday, December 13, 2010

KLCI Stock - TCHONG / 4405 - 2010 Quarter 3

Par Value:0.50

My Forecast P/E now:(5.36-0.12)/0.35 = 14.97 (High)
My Target Price:4.9+0.12 = 5.02 (PE 14, EPS 0.35, DPS 0.12)
My Decision:NOT BUY unless price below 4.9
My Comment:Revenue and profit lower down, good cash flow, moderate liquidity ratio, moderate gearing ratio, MYR against USD weakening
Technical Support Price:5
Risk Rating:MODERATE
OSK Target Price:7.29 (22 Nov 10)

Latest Market Capital (Capital Size)3,601,920,000 (Very Large)
Return on Equity13.78%
Dividend Yield2.24%
Profit Margin0.0821
Asset Turnover1.2901
Tax Rate0.3082
Net Asset Value Per Share2.5
Net Tangible Asset per share2.5
Price/Net Tangible Asset Per Share2.25
Cash Per Share0.19
Liquidity Current Ratio2.7497
Liquidity Quick Ratio1.4596
Liquidity Cash Ratio0.2146
Gearing Debt to Equity Ratio0.6065
Gearing Debt to Asset Ratio0.3768
Average working capital per thousand Ringgit sale29.4%
Average days to sell the inventory73
Average days to collect the receivables32

Company Description
Tan Chong Motor Holdings Berhad is principally engaged in investment holding and the provision of management services to its subsidiary companies. The Company comprises three business segments: Vehicles assembly, distribution and after sale services, which is engaged in the assembly and distribution of passenger and commercial vehicles, automotive workshop services, distribution of automotive spare parts and insurance agency; Financial services, which is engaged in the provision of hire purchase financing, personal loans and money changing, and Other operations, which is engaged in property and investment holding activities. The Company’s subsidiaries include Fujiyama Car Cooler Sdn. Bhd., Kereta Komersil Seladang (M) Sdn. Bhd., TC Aluminium Castings Sdn. Bhd., TC Manufacturing Holdings Sdn. Bhd., TC Transmission Sdn. Bhd. and VDC Sdn. Bhd. In October 2009, the Company incorporated three subsidiaries: Tan Chong Trading (Labuan) Pty Ltd; ETCM (C) Pty Ltd.

My notes based on 2010 Quarter 3 report (number in '000):-
- The overall nine-month results point toward a more cautious 2H 2010. There has been a slowdown in Q3 compared to the first six months. To counter this, we started to invest in more advertising and promotion as well as marketing support activities to build up for the launch of the all-new NISSAN Teana before Christmas

- Q3 2010 saw a pause in momentum. Revenues retracted to RM871.6 million compared to RM927.9 million in Q2 and RM870.4 million in Q1. July-August sales hit a soft patch and September was a short month with Hari Raya holidays

- EBIT margins fell from 10.5% in Q2 2010 to 8.3% in Q3 due to negative operating leverage as a result of slower revenue and a higher cost base. Gross margins remained intact due to a favourable foreign exchange rate on imports. However, operating expenses were higher than budget on the back of increased advertising and promotion costs taken up for the Raya promotion and Teana pre-launch events. The timing difference in expenditure incurred upfront before the start of actual sales is necessary to build a flagship model in the high end D-segment. We should be reaping the rewards of this investment soon

- Estimate next 4Q eps after 2010 Q3 result announced = 0.35, estimate PE on current price 5.62 = 15.71(DPS 0.12)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.0983*4 = 0.3932, estimate highest/lowest PE = 12.03/1 (DPS 0.12)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.0991*4 = 0.3964, estimate highest/lowest PE = 12.92/9.51 (DPS 0.11)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.0639*4 = 0.2556, estimate highest/lowest PE = 19.91/10.92 (DPS 0.11)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.0527*4 = 0.2108, estimate highest/lowest PE = 16.65/10.44 (DPS 0.1)
- Estimate next 4Q eps after 2009 Q2 result announced = 0.0528*4 = 0.2112, estimate highest/lowest PE = 12.31/8.19 (DPS 0.1)
- Estimate next 4Q eps after 2009 Q1 result announced = 0.0626*4 = 0.2504, estimate highest/lowest PE = 7.35/5.39 (DPS 0.1)
- Estimate next 4Q eps after 2008 Q4 result announced = 0.0425*4 = 0.17, estimate highest/lowest PE = 9.12/6.12 (DPS 0.1)

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