Tan Chong Motor Holdings Navigates Challenges with a Profit Turnaround in Q1 2025 – What’s Driving It?
May 23, 2025
Greetings, fellow investors and automotive enthusiasts! Today, we’re diving deep into the latest financial report from Tan Chong Motor Holdings Berhad (TCMH) for the first quarter ended 31 March 2025. This report offers a fascinating glimpse into the company’s performance, revealing a significant turnaround in profitability despite a challenging market environment. It’s a story of strategic adjustments, a one-off boost, and a clear roadmap for the future. Let’s break down the numbers and understand what’s truly driving TCMH’s journey.
The most striking highlight? TCMH swung from a loss to a pre-tax profit of RM4.6 million in Q1 2025, a stark contrast to the RM16.1 million loss recorded in the same period last year. This remarkable shift was primarily propelled by a substantial one-off fair value gain on investment properties.
Core Data Highlights: A Closer Look at the Numbers
Overall Financial Performance
While the headline profit figure is encouraging, a deeper dive reveals a nuanced picture. TCMH’s revenue for the first quarter of 2025 stood at RM553.0 million. This represents a slight decrease when compared to the RM563.7 million generated in the same quarter last year, reflecting softer consumer sentiment and intense market competition.
Q1 2025 Performance
Revenue: RM553.0 million
Profit Before Tax: RM4.6 million
Net Profit: RM1.5 million
Earnings Per Share: 0.63 sen
Q1 2024 Performance
Revenue: RM563.7 million
Loss Before Tax: (RM16.1 million)
Net Loss: (RM19.7 million)
Loss Per Share: (2.41 sen)
However, the shift from a pre-tax loss to a pre-tax profit is significant. This was largely due to a one-off fair value gain of RM54.0 million on investment properties. Without this gain, the underlying operational performance would show different dynamics. Additionally, the quarter saw a net foreign exchange loss of RM4.2 million, contrasting sharply with a net foreign exchange gain of RM13.0 million in the same period last year, further impacting the bottom line.
Comparing to the immediate preceding quarter (Q4 2024), TCMH showed stronger sequential growth. Revenue increased by 8.2% from RM511.2 million in Q4 2024 to RM553.0 million in Q1 2025. The pre-tax profit also saw a dramatic improvement, swinging from a loss of RM52.1 million in Q4 2024 to a profit of RM4.6 million in Q1 2025, an increase of 108.8%.
Segmental Performance Breakdown
Let’s break down how each business unit contributed to the overall results:
Vehicles Assembly, Manufacturing, Distribution & After-Sales Services (Automotive)
This core segment experienced a slight revenue reduction of 1.5% to RM530.5 million compared to the same period last year, primarily due to heightened competition in both local and international markets. However, its Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) surged by an impressive 2,205.9% to RM56.9 million. This substantial increase was almost entirely attributable to the RM54.0 million one-off fair value gain on investment properties. Excluding this gain, the underlying EBITDA for the automotive division was RM2.9 million, indicating a modest operational profit.
Financial Services (Hire Purchase and Insurance)
The financial services division recorded revenue of RM18.1 million, a 3.3% decrease compared to the same period last year. It reported a Loss Before Interest, Tax, Depreciation and Amortisation (LBITDA) of RM0.3 million, an increase of 106.7% compared to the same period last year. This was mainly due to lower revenue and higher impairment losses on hire purchase receivables.
Other Operations (Investments and Properties)
Revenue from other operations decreased by 33.9% to RM4.4 million. This segment’s EBITDA dropped significantly by 96.8% to RM0.8 million compared to the same period last year, primarily due to lower revenue and a net foreign exchange loss in the current quarter, which arose from transactions and outstanding balances denominated in foreign currencies.
Financial Health and Position
As of 31 March 2025, TCMH’s retained earnings stood at a healthy RM1.33 billion. The net assets per share remained stable at RM3.85, consistent with the figure at 31 December 2024. Total borrowings saw a reduction, standing at RM1.554 billion compared to RM1.716 billion at the end of 2024, reflecting prudent financial management, partly due to the redemption of RM200.0 million in Sukuk Murabahah.
Cash and cash equivalents, however, saw a net decrease of RM200.6 million during the quarter, bringing the total to RM343.1 million. This was mainly due to net cash used in operating activities (RM40.7 million) and financing activities (RM166.0 million), which included significant repayments of term loans and revolving credit.
Navigating the Road Ahead: Risks and Prospects
TCMH acknowledges the challenging market environment but is actively pursuing a recovery strategy. The Malaysian Automotive Association (MAA) forecasts a slight decline in Total Industry Volume (TIV) to approximately 780,000 units in 2025. However, domestic demand is expected to remain robust, supported by Bank Negara Malaysia’s GDP growth forecast of 4.5% to 5.5% for 2025. Global economic conditions, particularly heightened trade tensions, continue to introduce uncertainty.
Strategic Opportunities
- New Product Introductions: The official launch of the Nissan Kicks e-POWER in December 2024 has shown positive traction in Q1 2025, appealing to consumers seeking fuel-efficient, lower-emission options without external charging.
- Expansion into EVs: A strategic collaboration agreement with SAIC GM Wuling Automobile to locally assemble the Tan Chong-branded TQ Wuling Bingo EV marks TCMH’s entry into the affordable entry-level compact EV market, targeting value-driven urban commuters.
- Vietnam Market Penetration: Performance in Vietnam continues to benefit from successful sales of GAC models, notably the luxury MPV GAC M8, which enhances brand equity. Commercial vehicle operations, including the TQ-Wuling N300P light pickup and Euro 5 King Long buses, are also showing steady improvement.
- Operational Excellence: The Group remains committed to prudent financial management, operational efficiency, and digitisation. Efforts include streamlining supply chain costs, enhancing after-sales service, and upgrading customer-facing facilities.
- Regional Expansion: Active exploration of new product opportunities in Cambodia, Laos, and Myanmar, alongside plans to deepen manufacturing footprint for upcoming model rollouts and export market opportunities, particularly in the EV sector.
Key Challenges
Despite the strategic initiatives, TCMH faces several headwinds:
- Intense Market Competition: Both local and overseas markets are highly competitive, impacting sales volumes and pricing.
- Softer Consumer Sentiments: Economic uncertainties can lead to reduced consumer spending on big-ticket items like vehicles.
- Foreign Exchange Fluctuations: The shift from a foreign exchange gain in the prior year to a loss in the current quarter highlights the volatility and impact of currency movements on profitability.
- Higher Impairment Losses: Increased impairment losses on receivables in the financial services division indicate potential risks in credit quality.
- Global Trade Tensions: Broader US tariffs and international market volatility can affect supply chains and overall business environment.
Summary and
Tan Chong Motor Holdings Berhad’s Q1 2025 report showcases a significant turnaround in its pre-tax profit, primarily driven by a strategic one-off fair value gain on investment properties. While underlying operational challenges persist, reflected in slightly lower revenue and negative foreign exchange impacts, the company is actively implementing a recovery strategy. Its focus on new product introductions, especially in the EV segment, strengthening regional presence, and enhancing operational efficiencies are positive steps towards navigating a competitive landscape.
The resolution of the material litigation in favour of TCIE also removes a potential contingent liability, providing further stability. Investors should consider the impact of the one-off gain when evaluating the core business performance and monitor the effectiveness of the new product launches and market expansion strategies.
Key points to monitor for the coming quarters:
- The contribution of new EV models (Nissan Kicks e-POWER, TQ Wuling Bingo EV) to overall sales and profitability.
- The performance of the Vietnam operations and other regional expansions.
- Management of foreign exchange exposure and its impact on the bottom line.
- Trends in consumer sentiment and the competitive landscape in key markets.
- The Group’s ability to continue reducing borrowings and manage cash flow effectively.
From a professional standpoint, TCMH’s ability to pivot and secure a profit in a tough quarter, even with a significant one-off item, demonstrates a proactive management approach. The strategic push into EVs and regional growth markets is crucial for long-term sustainability. However, the underlying operational profitability, excluding the fair value gain, indicates that the core automotive business still faces headwinds that need consistent strategic execution to overcome.
What are your thoughts on TCMH’s Q1 2025 performance? Do you believe the company’s strategic initiatives, particularly in the EV space, will be sufficient to drive sustainable growth in the coming years? Share your insights in the comments below!
