price of RM6.20 after the company announced a tie up with Xi'an Silver Bus Corp (Xi'an) this week.
"TCM will initially utilise its Segambut plant to assemble chassis and engine components during the first year of production. In addition, TCM will utilise existing UD 3-S centres as after-sales centres for Silver Bus. This explains the small RM100,000 investment required for this foray, which is mainly for purchase of jigs and fixtures for the assembly lines.
"By 2012, however, TCM expects to set up a body manufacturing and assembly plant for commercial vehicles at APM's (a sister company of TCM) plant in Seri Kembangan (which will be vacated by next year-end) via a RM20 million investment. This plant will cater for both Silver Bus and UD commercial vehicles assembled and distributed by TCM.
"TCM expects to sell 80 Silver Bus vehicles next year (expected commencement in the second quarter) - which adds circa 4 per cent to its commercial vehicle total industry volume of 1,800 (based on financial year 2009 figures). Chassis and engine sales of luxury coaches typically fetched a price of RM270K/unit, but a coach complete with body and interiors can fetch a price of RM500,000 per unit.
As such we would expect margins and topline from sales of commercial vehicles to expand quite significantly once TCM's body manufacturing plant comes on stream in 2012," it said in a research report this week.
Tan Chong Motor (TCM) announced it had entered into an agreement with Xi'an Silver Bus Corp for a 10-year sole and exclusive right to assemble and distribute completely knocked down buses under the brand of Silver Bus in Malaysia."Notably, Malaysia will be Xi'an's first foray into the Asean market and we do not rule out further expansion in the region, especially in Vietnam where TCM expects to complete construction of an assembly plant by the third quarter of next year.
We understand that production of Silver Bus chassis and engine will eventually be shifted to TCM's Vietnam plant (from Segambut), where Vietnam will eventually become the key market of the group (versus Malaysia which is more passenger vehicle-centric)," it said.
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