Dah Chong Hong lands Bugatti in mainland drive
Dah Chong Hong Holdings has won the dealership rights for Volkswagen's Bugatti cars in China, a deal critical to expanding the mainland car dealership market, chairman Clement Hui Yingbun said.
'China's automobile industry recorded robust growth for the past few years,' Mr Hui said. 'But there is fierce competition in the Chinese automobile market because many big global carmakers, such as Volkswagen and General Motors, will often handle car distribution and after-sales services by themselves.'
The company, a distribution unit of property-to-metals conglomerate Citic Pacific, plans to focus on the high-growth car dealership business for the next three years.
It is also developing its food supply chain management business. DCH has set aside HK$300 million to enhance its food supply chain management.
'The integration of food manufacturing, processing and retailing will lift the profit margin of the company,' Mr Hui said.
The company plans to open five more DCH Deluxe food stores in Hong Kong this year. It has 55 stores now.
'We hope, eventually, the proportion for motor and food supply chain management will take 50 per cent each of the company's overall business,' Mr Hui said.
The motor dealership business now accounts for more than 60 per cent of DCH's overall business, while food supply chain management makes up the remainder.
DCH planned to open a further 10 to 12 4S outlets (sales, spare parts, service and customer surveys) in the eastern and southern parts of China, as well as in Yunnan province, this year with HK$500 million capital expenditure, Mr Hui said. The company operates 29 4S outlets in 10 major mainland cities.
Analysts have said DCH has focused too much on its Hong Kong business, which reduced investor interest.
A recent report by BNP Paribas said more revenue and earnings contributed from mainland operations in the future would provide a more attractive valuation. But the bank lowered its 12-month target price to HK$3.30 from HK$4.70, which implies an 11.7 times price-earnings ratio.
BNP Paribas sponsored the firm's initial public offering in October last year that raised US$589 million.
The stock closed down 1.52 per cent yesterday at HK$2.59. The shares have fallen 56 per cent from the listing price.
'I don't have any comments on the company's share price as this is uncontrollable,' Mr Hui said. 'Putting that aside, we beat the profit target of HK$406 million with net income of HK$430 million last year.'
