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Thursday, 1 August 2013

Would Jim Roger invest Tan Chong gets sole Nissan rights in Myanmar

Tan Chong Motor Holdings Bhd's (TCMH) wholly-owned subsidiary ETCM (MM) Pte Ltd has been granted exclusive rights to distribute Nissan brand completely built-up (CBU) vehicles in Myanmar.
This is in addition to the group's existing rights to sell Nissan vehicles in Malaysia, Vietnam, Cambodia and Laos.

ETCM (MM) yesterday signed a distribution agreement with Nissan Motor Co Ltd for the purpose. The deal is for a period of five years and will automatically be extended for further periods of one year.

Nissan Motor, Japan's second-largest automotive company, has a range of 64 models under the Nissan, Infiniti and Datsun brands.

It said the working capital for the new Nissan business in Myanmar for the first three years of operation is estimated at US$2.5 million, which will be internally funded.

"Distribution of the vehicles in Myanmar is expected to commence in the third quarter of 2013, with projected sales volume of about 300 units per year.

"The new business venture is not expected to contribute significantly to TCMH Group's revenue and profit for the financial year ending Dec 31, 2013 but is expected to contribute positively to the earnings of TCMH Group in the long term," said TCMH.

"Given that the Myanmar market contribution is immaterial with little financial impact and relatively small market, we leave our earnings estimates unchanged at this juncture," K&N Kenanga Research Sdn Bhd said in its note to clients yesterday.

With a pipeline of attractive new models as well as the momentum build-up by its current models, we believe TCMH is well poised to capture the booming demand of automotive in Myanmar," it said.

RHB Research Institute Sdn Bhd in its note said "its investments in frontier markets in Myanmar and Indo-China will continue to offer long-term upside,"

"Contributions (from Myanmar) in the next few years will likely be modest, although the long-term potential is enormous," RHB Research added. It has a "buy" call and a target price of RM7.40 on the stock.

HLIB Research is also positive on TCMH's new foreign foray, saying it is part of the group's long term strategic move on regional expansion plan, building a strong partnership with Japan's Nissan Motor.

"Investing into Myanmar has completed TCMH's foreign portfolio of Indochina market (Vietnam, Laos, Cambodia) with left-hand-drive," it said.

Ex-Partner of George Soros, Co-founder of Quantum Fund, Jim Roger want have exposure in Myanmar.  He said he buy stamps and collecting coins of Myanmar to have exposure in Myanmar in his new book "Street Smart". It is interesting to see whether he would he buy Tan Chong as first year sales expected to be insignificant 300 units only compare to it existing volume?

Update : Addressing TCM’s under-capacity issue
Update 2: TCM's exclusive rights to Indochina and Myanmar are well supported by its sister company, APM Automotive, which is one of the top-3 autoparts companies in ASEAN
Related Post : Thai Beverage and F&N Myanmar exposure for Jim Roger

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