Bursa Announcements

Introduction

The Board of Directors of Tan Chong Motor Holdings Berhad (“TCMH” or “the Company”) is pleased to announce that TC Trucks Sales Sdn Bhd (“TCTS”), a wholly-owned subsidiary of TCMH, has on 20 June 2018 entered into an Exclusive Distributorship Agreement (“Agreement”) with Xiamen King Long United Automotive Industry Co., Ltd (“King Long”) of No. 9, King Long Road, Jimei District, Xiamen 361023, Fujian, People’s Republic of China, whereby TCTS has been appointed as King Long’s sole and exclusive distributor, assembler and after-sales service provider (including the sale and distribution of spare parts) of King Long coaches and buses, in both completely assembled form and in its bare chassis form (“King Long Products”), in Malaysia (“Appointment”).

Information on TCTS

TCTS is a wholly-owned subsidiary of TC Trucks Group Sdn Bhd, which in turn is a wholly-owned subsidiary of TCMH.

TCTS was incorporated on 29 December 2010 to carry on the principal activities of distribution and sales of commercial vehicles in Malaysia. 

Information on King Long

King Long is a company incorporated in the People’s Republic of China which specialises in the design, production and sale of various buses, minibuses and coaches. Founded in 1988, King Long has its own research and development (“R&D”) and testing institutions approved by the Chinese government, such as Corporate Technical Centre, Postdoctoral Scientific Research Workstation, as well as Safety & Energy-Saving Testing Centre, which bring together 1,000 technical elites in the industry. King Long ranks No. 1 in the industry in China in terms of corporate R&D strength and product technology. It has three (3) manufacturing bases in China with total land area of 800,000 sq. meter and annually produces 25,000 buses and coaches as well as 30,000 mini vans.

Salient Terms of the Agreement

Pursuant to the Agreement, King Long grants TCTS, the sole and exclusive right to do the following within Malaysia:

(i)    To assemble King Long Products;

(ii)   To promote, distribute and sell the completely assembled King Long Products; and

(iii)  To render after-sales service to King Long Products (including sale and distribution of spare parts).

The initial term of the Agreement shall be for a period of five (5) years (“Initial Term”) commencing from the date of execution of the Agreement by both TCTS and King Long, and may be extended subject to the parties' mutual written agreement. The parties shall commence negotiation on the terms governing such renewal at least six (6) months prior to the expiry of the Initial Term.

Rationale

King Long is a renowned bus manufacturer which has complete buses and coaches range that facilitates the Group’s penetration into different bus/coach segment in Malaysia and Vietnam. The Group via its wholly-owned subsidiary, TC Motor Vietnam Co., Ltd. (“TCMV”), had on 10 January 2018 entered into an exclusive distributorship agreement with King Long, whereby TCMV has been appointed as King Long’s sole and exclusive distributor, assembler and after-sales service provider of the XMQ6829Y King Long coach model in Vietnam.     

King Long is familiar with the Malaysian sales and after sales regulations and market situation. They have gained the experience via their participation in local tender through their previous distributor in Malaysia whereby they have been able to obtain and comply with the strict tender requirements.

As a well-established bus manufacturer, King Long is manned by experienced personnel and dedicated support team for the after-sales services. Their commitment to the Malaysian market is portrayed through their stationing of a service engineer here to serve all King Long’s customers in Malaysia.

Financial Effects

TCTS is expected to start sales of King Products (“King Long Business”) in Q4 2018. The working capital required for the new King Long Business for the first five (5) years of operation is estimated at RM 6.5 million which will be funded by the TCMH Group from its internal sources.

The King Long Business will not contribute significantly to the TCMH Group’s revenue and profit for the financial year ending 31 December 2018 but is expected to contribute positively to the earnings of TCMH Group in the long term.

The Company does not foresee any exceptional risks other than the normal operational risks associated with the King Long Business. The Company will take necessary steps to mitigate the risks as and when they occur.

Directors’ and Substantial Shareholders’ Interests

None of the Directors, substantial shareholders of TCMH and/or persons connected with them, has any interest, direct or indirect, in the Appointment.

Directors’ Statement

The Board of Directors of the Company is of the opinion that the Appointment is in the ordinary course of business and in the best interest of TCMH Group.

This announcement is dated 20 June 2018.