Kim Eng on 12 April
Background: Sin Heng Heavy Machinery provides heavy lifting solutions to customers in the infrastructure and geotechnical, construction, offshore and marine, and oil and gas industries. Its core business is in the rental and trading of cranes, aerial lifts and other heavy lifting equipment. As of FY Jun11, it has a rental fleet of 107 cranes and 149 aerial lifts, with total lifting capacity of 12,071 tons, spread out over Singapore, Malaysia and Vietnam.
Recent developments: Interest in the stock has spiked following the company’s recent announcement that it has entered into a joint venture in Myanmar to undertake heavy equipment leasing, rental, distribution and sales. Sin Heng has invested S$250,000 in this joint venture.
Myanmar never fails to excite. Since news of a potential liberalisation in Myanmar broke, companies with the slightest hint of association with the country never fail to excite. Without doubt, the construction sector would be one of the key sectors to benefit from this turn of events as infrastructure and property development would likely accelerate. There are foreseeable advantages in being an early mover in the country.
Drawing parallels to the Vietnam foray. Sin Heng ventured into Vietnam in 2009. It currently has offices in Hanoi and Ho Chi Minh City, where it is engaged in equipment rental business. In FY Jun11, Vietnam contributed about 3% of total revenue. It took Sin Heng about two years to achieve this level of revenue contribution from a developing country where tremendous opportunities and growth prospects beckon.
Still too early to get excited. The current excitement over Sin Heng’s Myanmar involvement may be a little premature. If its Vietnam investment is used as a gauge, it may take the company at least two years before it can see any positive results from its Myanmar investment. The stock currently trades at 14.5x FY Jun11 PER and 1.3x P/BV after the recent increase in share price.
Private equity share price overhang. Sin Heng’s major shareholder is a private equity player, SEAVI Advent, which owns a 39% stake at an effective cost of 19.9 cents per share. This may potentially create a share price
overhang.
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