TAN CHONG MOTOR HOLDINGS BERHAD VALUE EVALUATION

Tan Chong is no stranger to the dealership of foreign car in Malaysia. Tan Chong also lengthen its business arm by venturing into other field such as financial services, property and education services. Tan Chong group sees the market in a packet where such industries are interconnected with each other which we can observe from automobile assembling to after sales service and nurturing its workers with skills and knowledge. Designs of Nissan is never inferior compared to the others. By capturing the niche of upper middle class with its world class features, Nissan is undoubtedly standing firm challenged by different factors. When we look into Nissan itself, its brand is well established with its sports car featuring in blockbuster movies which to me, is undoubtedly a strong publicity advantage. Also, with its own financial sector, Tan Chong is able to provide extra options for its customer such as leasing where there is tax break element when it is utilized for business use. 

 When it comes to automobile industry in Malaysia, foreign brand encounters disadvantages as in heavy duty imposed which ultimately boost up the price. Price war is eventually scrolling in as local players are launching low deposits with their already low prices. Also, judging from the statement of the new Proton chairperson, it is likely that heavy duty will be continuously imposed to protect the local players. Furthermore, Malaysia government encourages mostly on the sale of locally assembled energy efficient vehicles where the rest will left vulnerable to heavy duty and challenges. 

Based on the disadvantages above, it disregard my interest towards such well-managed company. It reminds me of the textile business hold by Berkshire Hathaway in the 1970’s where good management must be tied with good business in order to strive. Filtered out.

Stock: TCHONG Code: 4405

CYCLE & CARRIAGE BINTANG BERHAD Value Evaluation

Cycle Carriage is one of the Malaysia's largest dealers for Mercedes-Benz vehicles in which mass promotions and advertisements can be seen on newspaper daily. Although there are many dealers out there, we believe that Cycle Carriage is able to leverage on its purchasing ability and providing the best prices and services altogether and in turn generate increasing revenue. However, there are more emerging luxury vehicle brand which are competing for their respective market shares in Malaysia which threaten Cycle Carriage’s position.

In order to stand their way out, fierce marketing campaigns are held which increase their distribution cost in recent years. In a worse scenario, the company may need to hold more promotions in years of crises and push their margin further down. For luxury goods, the cost of sales alone is consuming high portion of the revenue already. Therefore, not much profitability can be expected. Also, recent announcement of government’s NAP policy has confirmed that prices of overseas automobile will gradually decrease for 30% in 5 years which will cause the consumers to adapt wait and see approach where in short term, revenues for the dealer may decrease.

According to the free cash flow, the company's performance has been deteriorating throughout these ten years. Furthermore, ROA and ROE has not appeared to be satisfactory which reflects the company low efficiency. Therefore, there is lack of potential for the company to generate stable growth in the future. Talking about dealership, will Cycle Carriage strive its way up in terms of cost management and less capital expenditure? I am looking forward to it.

Stock: CCK           Code: 7035