This article first appeared in The Edge Malaysia Weekly on April 21, 2025 - April 27, 2025

EVEN though its core automotive business is weak, Tan Chong Motor Holdings Bhd (KL:TCHONG) has valuable assets, especially its various parcels of land in prime areas.

Its share price, which is hovering at 30 sen today (compared with a peak of over RM6 in 2013), belies the value of the assets that it is carrying on the books. The value of those assets is reflected in Tan Chong’s net tangible assets (NTA) of RM3.80 per share.

Tan Chong has a market capitalisation of a mere RM202 million, less than half the RM515 million book value of the 46.9 acres of land it owns in Segambut.

Despite the valuable assets and Tan Chong’s exclusive relationship with Nissan in Malaysia, analysts remain bearish on the company for its perceived lack of strategy to stop the operational bleeding and create a new catalyst of growth.

“We remain bearish on Tan Chong to turn profitable within our forecast years, given the absence of a clear recovery strategy from management. Although Tan Chong introduced its e-Power model Nissan Kicks last November, intensifying competition in the local market, particularly in the non-national segment, is expected to weigh on the group’s earnings.

“As a result, we believe Tan Chong will continue to cede market share to its competitors,” RHB Research says in a note after the company released its final quarter results for the financial year ended December 2024.

MIDF Research also expects losses to widen in the current year of operations due to intense competition and the high marketing cost for GAC models in both Malaysia and Vietnam. Tan Chong entered into a tie-up with GAC, the fifth-largest automobile company in China, last year.

Tan Chong’s mainstay is the Nissan models, for which the company is the exclusive distributor of cars and spare parts in Malaysia. The Nissan brand today only has a market share of 1% in Malaysia while the total industry volume (TIV) was more than 830,000 cars in 2024.

Some 10 years ago, when the TIV was 666,000 units, Tan Chong had a market share of 7%.

The dwindling sales in the auto business are synonymous with the fortunes of Nissan itself, which has seen a significant drop in sales. However, other auto players, especially Oriental Holdings Bhd (KL:ORIENT), have been able to hold their own due to years of diversifying their business. Today, the plantations and hospitality segments complement Oriental’s auto business.

At the moment, the market is only looking at Tan Chong for its auto business. Nobody is attaching a value to its property development prospects because nothing has been done to unlock the intrinsic value in the stock.

The land in Segambut, Kuala Lumpur, is booked at RM515 million in Tan Chong’s books, based on a valuation done in 2022. It translates into RM252 per sq ft (psf). Production operations are still ongoing at the Segambut plant, which means the land is still classified as industrial.

But opposite this assembly plant, several blocks of mid- to high-end condominiums have sprung up — built by other people. The properties were developed as residential and commercial units and the condominiums were sold at an average of RM600 psf three years ago.

In 2013, a piece of industrial land nearby (not owned by Tan Chong) was sold to a joint venture for property development purposes in a deal that fetched a value of RM280 psf for the land alone.

“Tan Chong’s Segambut land will fetch a much higher value than what is stated in the books if it is to be developed for residential and commercial properties. In fact, the parcel of almost 47 acres is one of the largest tracts of land in the city. It can be developed over many years and will give Tan Chong a sizeable income,” says a real estate valuer.

Tan Chong, in a reply to The Edge, said that currently, there are no plans yet to develop the land in Segambut.

“At this time, we are still using the Segambut plant to assemble passenger and commercial vehicles,” the company says.

The bulk of Tan Chong’s assembly operations has moved to Serendah, Selangor, where it has 167 acres. The Segambut plant has a capacity to assemble 20,000 vehicles per annum while the plant in Serendah has a capacity of more than 45,000 units, with ample land to expand operations.

The utilisation rates of the Serendah and Segambut plants are not known.

Completed in 2006, the Serendah plant was built with the view to it becoming the entry point for the assembly of some Nissan models to Asean. So, it has ample capacity.

Tan Chong says the Serendah plant produces Nissan vehicles and achieved a milestone last year. “Last year marked an important milestone for Tan Chong when we commenced production of the Nissan Serena for export to the Thailand market.”

MIDF Research in its report says that there were no details on the volume of exports. The research house also says management indicated ongoing discussions with the principal Nissan about expanding to new markets and models.

The Serendah plant is another valuable piece of land in Tan Chong’s books that is undervalued. The plant is located near the auto hub of Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

Perodua is the dominant auto player in the domestic market as well as one of the biggest sellers of vehicles in the region as a whole. In Malaysia, Perodua has the lion’s share of the market while in Asean, Perodua commands the No 2 spot after Toyota for 2024.

Perodua has been in expansion mode and, in 2023, it purchased 22.22 acres from UMW Group for RM52.27 million.

In Tan Chong’s books, the value of the 167 acres in Serendah is booked at RM272.5 million. If the UMW-Perodua transaction is used as a benchmark, Tan Chong’s land will be worth around RM400 million.

At 30 sen per share, Tan Chong remains a grossly undervalued stock relative to its NTA of RM3.80. Its market capitalisation is RM200 million while the value of its Segambut and Serendah land is close to RM1 billion.

But as long as management does not come up with a strategic plan to reduce its dependence on the auto sector or to show how it plans to monetise its land, the company will underperform. 

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