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9M21 results came in below

Maintain BUY and MYR1.45

9M21 core earnings came in below ours/ consensus estimates, on weaker-than-expected 3Q21 performances at its MY & VN ops. This led to a weaker earnings outlook for FY21. That said, the sub-par FY21 is wellflagged, with operations being continuously disrupted by the multiple lockdowns due to the Covid-19 pandemic. We remain positive of its recovery in FY22. Our TP is pegged to 16x FY22 PER (mean valuations).

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Continues to be affected by the pandemic in 3Q21

Revenue and EBITDA fell by 31% and 78% QoQ in 3Q21, dragged down mainly from the: (i) lower earnings (-59%) at its Malaysia (MY) ops and (ii) losses at its Vietnam (VN) ops (-MYR2m vs. +MYR2m in 2Q21). Operations in these two markets continued to be affected by the movement control restrictions imposed to manage the Covid-19 effect during the quarter, which greatly affected its overall automotive sales and production. Its MY ops alone suffered a 37% QoQ drop in vehicle sales, to 1.9k units in 3Q21 (9M21: 7.7k units). The underlying QoQ weakness led to a higher core net loss of MYR31m in 3Q21 (+57% Qo), which took its 9M21 core loss to MYR43m (-47% YoY), higher than our initial FY net loss of MYR18m.

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Higher losses in FY21, FY22-23 estimates unchanged

Post 3Q21, we have widened FY21’s losses to MYR32m, mainly to account for lower MY vehicle sales estimate (-6% to 12.4k units) and weaker earnings at its VN ops. That said, we expect TCM to return to the black in 4Q21, on higher vehicle sales outlook, driven particularly at its MY ops (+147% QoQ to 4.7k units), following the easing of the movement control restrictions since Aug-21. Our FY22-23 estimates are unchanged.

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Looking ahead to a recovery FY22

The sub-par FY21 has been well-flagged. We posit that the worst is over for TCM, operationally-speaking. Most of the major setbacks experienced in 2020-21 are unlikely to recur next FY. Focus should be on FY22, on a recovering outlook ahead. Vehicle sales volume will be greatly aided by the extension of the 0%-5% SST impact up to Jun 2022.

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