Tan Chong Motor (TCM MK)
Relooking From The Underlying Asset Angle; U/G To BUY
- U/G BUY from Sell, new MYR1.12 TP from MYR0.27, 42% upside. We think yesterday’s rally reflects a market view shift. Tan Chong Motor was earlier seen for its ongoing automotive business, which led it to being valued at <0.2x P/BV. Post the unexpected 10 Jul land sale, the market has started to relook TCM from an underlying asset angle. Note: The bulk of the assets were revalued in 2022. Hence, we view the BV to be close to its RNAV. Our TP is now based on a 70% discount to RNAV. We make no changes to our earnings estimates for now. This report marks the coverage transfer to Iftaar Hakim Rusli.
- On 10 Jul, TCM sold 3.2-acre plots along Jalan Putra to Avaland (AVALAND MK, NR) for MYR148.8m following the first land sale to Avaland in Petaling Jaya earlier this month for MYR49m. The total gain on disposal for these lands is expected to be between MYR15m and MYR18m with both deals transacted between MYR518psf and MYR1,067psf. Management said the plots sold were used for non-manufacturing purposes.
- Property values support re-rating potential. According to its latest annual report, based on Top 10 largest properties, TCM owns c.14 acres of non-manufacturing land (eg showrooms, storage, and service centres) across Selangor, Kuala Lumpur, and Johor – these were recently revalued in 2022. Assuming market values of MYR250-1,050psf, we estimate these lands could be worth MYR220m, roughly 40% of TCM’s market cap. More importantly, the group does not disclose its exhaustive list of assets. Hence, there may be other smaller properties that might not be used for its automotive business but are suitable for redevelopment, eg the recent land disposal was not included in the Top 10 largest properties, implying more assets to be potentially realised.
- TCM still retains its traditional automotive model of owing the distribution network, which includes showrooms/properties vis-à-vis the current agency distribution model. Given that Nissan’s market share has fallen from 6% of TIV in 2010 to 1% in 2024, there may be incentives for TCM to resize its business model by selling some of their showrooms. The group currently operates c.50-60 branches, of which 20-30% are based in Kuala Lumpur.
- We changed valuation methodology to price to RNAV to reflect TCM’s underlying property assets. We ascribe a 70% discount to its RNAV, as the majority of its land is occupied by the ongoing Nissan manufacturing business. As such, there may be limited near-term plans to develop/sell these assets, reducing the likelihood of realising such land plots in the short term.
- UPGRADE to BUY with a higher MYR1.12 TP based on a 10% ESG discount, given its 2.5 score against the 3.0 country median. Key downside risks include lack of land disposals, lower-than-expected demand for Nissan vehicles, and weaker-than-expected FX movements.
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total turnover (MYRm) | 2,533 | 2,083 | 1,644 | 1,575 | 1,598 |
| Recurring net profit (MYRm) | (127) | (208) | (145) | (94) | (94) |
| Recurring net profit growth (%) | 252.0 | 63.7 | (30.5) | (35.0) | (0.3) |
| Recurring P/E (x) | na | na | na | na | na |
| P/B (x) | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 |
| P/CF (x) | na | 3.20 | 1.47 | 7.17 | 14.78 |
| Dividend Yield (%) | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| EV/EBITDA (x) | 11.43 | 16.56 | 12.18 | 11.19 | 11.47 |
| Return on average equity (%) | (1.8) | (3.2) | (5.9) | (4.1) | (4.2) |
| Net debt to equity (%) | 41.2 | 57.6 | 50.3 | 53.4 | 58.4 |
Overall ESG Score: 2.5 (out of 4)
E Score: 2.7 (GOOD)
S Score: 2.7 (GOOD)
G Score: 2.0 (MODERATE)
Please refer to the ESG analysis on the next page
Note: Small cap stocks are defined as companies with a market capitalisation of less than USD0.5bn.
Emissions And ESG
Trend analysis
TCM does not disclose its greenhouse gas (GHG) emissions in absolute terms. It, however, discloses its carbon emission intensity levels, which more than doubled in 2022.
| Dec-22 | Dec-23 | Dec-24 | Dec-25 | |
|---|---|---|---|---|
| Scope 1 | na | na | na | na |
| Scope 2 | na | na | na | na |
| Scope 3 | na | na | na | na |
| Total emissions | na | na | na | na |
Latest ESG-Related Developments
Social-related initiatives: TCM provides 100% sponsorship for technical and vocational education and training (TVET) in automotive studies for students from underprivileged and marginalised backgrounds.
Green energy: TCM has embarked on a solar energy project, which has been granted a 4-year power purchase agreement (PPA) extension by the Energy Commission, which revised the 21-year PPA to a 25-year one.
ESG Unbundled
Overall ESG Score: 2.5 (out of 4)
Last Updated: 26 May 2025
E Score: 2.7 (GOOD)
In early 2024, TCM launched its floating Large-Scale Solar Photovoltaic (LSSPV) plant in Serendah, Selangor, supporting its net-zero emissions goal. At full capacity, the plant is expected to reduce CO2 emissions by 610,221 tonnes—equivalent to removing 132,656 cars from the road or planting 29m trees.
S Score: 2.7 (GOOD)
In 2023, the group conducted 176 training sessions covering key health and safety topics such as environmental, health and safety management, working at heights, chemical and waste management, noise control, and safe machinery operation. These sessions aimed to strengthen employees’ skills and awareness of workplace safety.
G Score: 2.0 (MODERATE)
At least half of the board comprises of independent directors. The board does not disclose, on a named basis, the top five senior management’s remuneration components in bands of MYR50,000. The company engages with the investment community on a quarterly basis through analyst briefings.
ESG Rating History
(Chart data from source: RHB)
Financial Exhibits
Valuation basis
70% discount to RNAV
Key drivers
- Increase in consumer spending;
- Long-term potential from Indo-China operations.
Key risks
Key downside risks include lack of land disposals, lower-than-expected demand for Nissan vehicles, and weaker-than-expected FX movements.
Company Profile
TCM owns and operates the distribution franchise for Nissan vehicles in Malaysia. This includes assembly, sales and distribution, after sales, as well as financial products. Its assembly division also undertakes third-party assembly work for Mitsubishi vehicles. The group also operates the Nissan vehicle distribution franchise in Cambodia, Laos, and Myanmar.
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring EPS | (0.20) | (0.32) | (0.22) | (0.14) | (0.14) |
| DPS | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 |
| BVPS | 4.20 | 3.85 | 3.62 | 3.46 | 3.31 |
| Return on average equity (%) | (1.8) | (3.2) | (5.9) | (4.1) | (4.2) |
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring P/E (x) | na | na | na | na | na |
| P/B (x) | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 |
| FCF Yield (%) | (32.4) | 1.6 | 52.5 | (1.6) | (8.8) |
| Dividend Yield (%) | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| EV/EBITDA (x) | 11.43 | 16.56 | 12.18 | 11.19 | 11.47 |
| EV/EBIT (x) | 2,931.57 | na | na | 268.65 | 271.67 |
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total turnover | 2,533 | 2,083 | 1,644 | 1,575 | 1,598 |
| Gross profit | 495 | 385 | 304 | 291 | 296 |
| EBITDA | 143 | 118 | 138 | 151 | 151 |
| Depreciation and amortisation | (142) | (139) | (145) | (145) | (145) |
| Operating profit | 1 | (21) | (7) | 6 | 6 |
| Net interest | (43) | (55) | (44) | (40) | (40) |
| Pre-tax profit | (44) | (83) | (51) | (34) | (34) |
| Taxation | (13) | (7) | (101) | (67) | (67) |
| Reported net profit | (52) | (83) | (145) | (94) | (94) |
| Recurring net profit | (127) | (208) | (145) | (94) | (94) |
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Change in working capital | 36 | (289) | 357 | 28 | (9) |
| Cash flow from operations | (55) | 161 | 350 | 72 | 35 |
| Capex | (112) | (153) | (80) | (80) | (80) |
| Cash flow from investing activities | (186) | (315) | (80) | (80) | (80) |
| Dividends paid | (7) | (7) | (7) | (7) | (7) |
| Cash flow from financing activities | 266 | 154 | (7) | (7) | (7) |
| Cash at beginning of period | 558 | 512 | 372 | 636 | 621 |
| Net change in cash | 25 | 1 | 264 | (15) | (52) |
| Ending balance cash | 584 | 512 | 636 | 621 | 570 |
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total cash and equivalents | 512 | 372 | 636 | 621 | 570 |
| Tangible fixed assets | 2,610 | 2,554 | 2,489 | 2,424 | 2,359 |
| Total investments | 66 | 60 | 60 | 60 | 60 |
| Total assets | 5,110 | 5,091 | 4,875 | 4,757 | 4,653 |
| Short-term debt | 1,122 | 1,446 | 1,446 | 1,446 | 1,446 |
| Total long-term debt | 518 | 375 | 375 | 375 | 375 |
| Total liabilities | 2,368 | 2,575 | 2,518 | 2,507 | 2,511 |
| Total equity | 2,742 | 2,516 | 2,357 | 2,250 | 2,143 |
| Total liabilities & equity | 5,110 | 5,091 | 4,875 | 4,757 | 4,653 |
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Revenue growth (%) | (17.0) | (17.8) | (21.1) | (4.2) | 1.5 |
| Recurrent EPS growth (%) | 252.0 | 63.7 | (30.5) | (35.0) | (0.3) |
| Gross margin (%) | 19.6 | 18.5 | 18.5 | 18.5 | 18.5 |
| Operating EBITDA margin (%) | 5.6 | 5.7 | 8.4 | 9.6 | 9.5 |
| Net profit margin (%) | (2.0) | (4.0) | (8.8) | (6.0) | (5.9) |
| Dividend payout ratio (%) | (12.6) | (7.8) | (4.5) | (6.9) | (6.9) |
| Capex/sales (%) | 4.4 | 7.3 | 4.9 | 5.1 | 5.0 |
| Interest cover (x) | 0.009 | (0.292) | (0.106) | 0.105 | 0.107 |
Recommendation Chart
(Chart data from source: RHB, Bloomberg)
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-05-25 | Sell | 0.27 | 0.46 |
| 2025-03-09 | Sell | 0.27 | 0.50 |
| 2024-11-27 | Sell | 0.32 | 0.50 |
| 2024-10-31 | Sell | 0.35 | 0.55 |
| 2024-07-02 | Sell | 0.62 | 0.79 |
| 2024-05-31 | Sell | 0.73 | 0.86 |
| 2024-03-01 | Sell | 0.74 | 0.99 |
| 2023-11-28 | Sell | 0.76 | 1.00 |
| 2023-08-28 | Sell | 0.78 | 1.06 |
| 2023-05-25 | Sell | 0.80 | 1.09 |
| 2023-03-09 | Neutral | 1.10 | 1.10 |
| 2023-03-01 | Neutral | 1.10 | 1.11 |
| 2022-11-23 | Neutral | 1.10 | 1.12 |
| 2022-08-30 | Neutral | 1.10 | 1.12 |
| 2022-07-19 | Buy | 1.04 | 1.12 |
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Investment Research Disclaimers
RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates’ clients generally or such persons as may be deemed eligible by RHB to receive this report and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. This report is not intended, and should not under any circumstances be construed as, an offer or a solicitation of an offer to buy or sell the securities referred to herein or any related financial instruments…
…[Standard disclaimer text continues for several paragraphs, covering liability, accuracy, forward-looking statements, and distribution restrictions.]…
DISCLOSURE OF CONFLICTS OF INTEREST
…[Detailed disclosure text for Malaysia, Indonesia, and Singapore follows here.]…
Analyst Certification
The analyst(s) who prepared this report, and their associates hereby, certify that:
(1) they do not have any financial interest in the securities or other capital market products of the subject companies mentioned in this report, except for:
| Analyst | Company |
|---|---|
(2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
