Friday, March 26, 2010
Tan Chong Motor Holdings: Buy, target price RM5.10
AMRESEARCH has reaffirmed its "buy" call on Tan Chong Motor Holdings (4405) and raised the stock's fair value to RM5.10, from RM4.70 previously, after lifting its profit projection.
The stockbroker has revised up its earnings projections for fiscal year 2010 and 2011 by 10 to 12 per cent, driven by higher volume projections and stronger ringgit assumptions.
It now expects Tan Chong's earnings to rise by a strong 61 per cent year-on-year. More importantly, Tan Chong's earning this year is expected to test a previous high of RM246 million achieved in fiscal 2008, AmResearch said.
"We have turned more bullish on Tan Chong's prospects following a recent meeting with management," it said in a March 24 report. Besides, the company is breaking new grounds with its transformation into a regionally integrated auto supply chain manager, which elevates the company's long-term earnings prospect substantially, it noted.
The broker also likes Tan Chong's strategic effort to expand the model mix locally, which will lead to a structural market share expansion. On top of that, the re-development of its 47-acre Segambut land bank will also lead to a revaluation gain of RM400 million to RM900 million, AmResearch said.