QUOTE(danielcmugen @ Aug 24 2017, 09:45 PM)
May I ask, what positive aspect do u see at tanchong?
From what I see from a newbie point of view,
-The chart is on a downtrend
-Their profit has been declining over the past 5 years
-I hardly see new nissan cars on the road
-No new nissan models launching until next year
https://www.carlist.my/news/no-new-nissan-m...til-2018/40995/To me my investment thesis is based on a long-term horizon. I go into a purchase decision based on one of the following idea of returns in mind:
1) 50% in 2 yrs
2) 100% in 3 yrs
3) 200% in 5 yrs (Tan Chong purchased on this assumption, i.e. I expect the stock price to triple within 5 yrs)
I don't care about downtrend charts.
Now, the stock is trading at depressed valuations. It's at 0.39X P/BV. Can it go lower? Sure. Which is why I put one leg in first. I bought at RM1.82 in May 2017.
I ask myself...do I see Tan Chong Motors in existence in 5 yrs time? I say sure. For a company like this to remain in existence in 5 yrs, it's highly illogical to be able to do so while trading at 0.4X P/BV.
No new model launches till 2018? That's one of the reasons I bought in. If they announced a new model launch, I guarantee the price will jump up 5% almost immediately. Every day we get closer to an eventual new model launch announcement.
Other factors that caused me to buy in:
- USD MYR and JPY MYR exchange rate was roughly +33% from 2014 to 2017, but YTD MYR has stabilized and slightly appreciated. MYR's worst days are over. Tan Chong's raw material costs are all denominated in USD and JPY. This hit bottomlines hard, but it won't get any worse, and there's potential upside here.
- Inventories are being drained out. This is the major hidden reason Tan Chong cannot bring in new Nissan models. Last year their inventories were almost hitting RM2bil, but since then sequentially they have been drained down, to now at RM1.3bil. By year end 2017 it should be under RM1bil and will set the stage of new model introduction.
- Indochina is growing double digits YoY for the past 4-5 years. Vietnam and Myanmar offer a really huge base for expansion. I have been tracking their monthly Vietnam sales figures, and it is up over 100% YTD.
- Favorable macro conditions. In addition to the MYR depreciation and inventory build-up due to ill timed production expansion in 2014, the country GDP growth was on a declining trend since 2014. However we have now had 2 quarters of above expectation GDP growth. At the moment consumer sentiment is still shaky, but it will eventually come back. When? Who knows, but come back it will.
Anyway this is too long a write-up now. Just thought I can share some of my thinking process. Of course not all my investment ideas are premised on these investment thesis. I buy growth stocks (Hevea), turnaround with positive near-term catalysts (Armada), short term underappreciated stocks (AirAsia), and beaten down cyclicals that I believe will eventually double/triple within 3-5 years (Tan Chong, MMHE).
Aug 24 2017, 10:59 PM
Quote
0.0365sec
0.24
6 queries
GZIP Disabled