Tat Hong Holdings (Tat Hong) reported a fairly strong set of 3Q13 results with net profit attributable to shareholders surging by 37% YoY to S$17.8m. Gross margin increased slightly to 35.9% (3Q12: 34.4%) due to higher contribution from Crane Rental and Tower Rental segments which yielded higher margins compared to Distribution. Looking ahead, the crane divisions are expected to continue their strong momentums with the roll-out of infrastructure projects across the region. However, Distribution and General Equipment Rental may slow due to weaker demand in Australia. Overall, we are still positive on Tat Hong and raise our fair value estimate to S$1.75 (previously S$1.70) as we roll forward our projections to FY13/14F. Maintain BUY.
3Q net profit jumped 37% YoY
Tat Hong Holdings (Tat Hong) reported a fairly strong set of 3Q13 results with revenue increasing by 5% YoY to S$206m and net profit attributable to shareholders surging by 37% YoY to S$17.8m. 3Q13 gross margin increased slightly to 35.9% (3Q12: 34.4%) due to higher contribution from Crane Rental and Tower Rental segments which yielded higher margins compared to Distribution.
Robust demand for cranes
3Q revenue for Crane Rental jumped 27% YoY to S$73.6m on the back of broad-based improvements in all key markets. In Singapore, Tat Hong benefitted from the construction of MRT lines and LNG plants in Jurong Island, while Malaysia’s operations were boosted by jetty and oil & gas projects. Tat Hong’s China-based Tower Crane division also performed well with a 24% YoY increase in revenue to S$19.4m. This was largely due to a larger fleet size and higher utilization rates. With the roll-out of various infrastructure projects across the region, both Crane Rental and Tower Crane divisions are expected to maintain their strong momentum in the near term.
Weakness in Distribution and Equipment Rental
Meanwhile, the group’s Distribution and General Equipment Rental segments registered revenue declines of 7% and 12% to S$90.6m and S$22.5m respectively for 3Q13, impacted by lower commodity prices and weaker demand in Australia. Looking ahead, the group warned that Australia could turn in a weaker performance due to reduced public spending by the government, a slower pace of activity outside the mining sector and inclement weather (i.e. Queensland flooding).
Maintain BUY
On the whole, we are still positive on Tat Hong as we believe that growth from its crane divisions should more than offset weakness in other divisions. We rolled forward our estimates to FY13/14F and raised our fair value to S$1.75 (previously S$1.70), still on 14x PER. Maintain BUY.
Tat Hong Holdings (Tat Hong) reported a fairly strong set of 3Q13 results with revenue increasing by 5% YoY to S$206m and net profit attributable to shareholders surging by 37% YoY to S$17.8m. 3Q13 gross margin increased slightly to 35.9% (3Q12: 34.4%) due to higher contribution from Crane Rental and Tower Rental segments which yielded higher margins compared to Distribution.
Robust demand for cranes
3Q revenue for Crane Rental jumped 27% YoY to S$73.6m on the back of broad-based improvements in all key markets. In Singapore, Tat Hong benefitted from the construction of MRT lines and LNG plants in Jurong Island, while Malaysia’s operations were boosted by jetty and oil & gas projects. Tat Hong’s China-based Tower Crane division also performed well with a 24% YoY increase in revenue to S$19.4m. This was largely due to a larger fleet size and higher utilization rates. With the roll-out of various infrastructure projects across the region, both Crane Rental and Tower Crane divisions are expected to maintain their strong momentum in the near term.
Weakness in Distribution and Equipment Rental
Meanwhile, the group’s Distribution and General Equipment Rental segments registered revenue declines of 7% and 12% to S$90.6m and S$22.5m respectively for 3Q13, impacted by lower commodity prices and weaker demand in Australia. Looking ahead, the group warned that Australia could turn in a weaker performance due to reduced public spending by the government, a slower pace of activity outside the mining sector and inclement weather (i.e. Queensland flooding).
Maintain BUY
On the whole, we are still positive on Tat Hong as we believe that growth from its crane divisions should more than offset weakness in other divisions. We rolled forward our estimates to FY13/14F and raised our fair value to S$1.75 (previously S$1.70), still on 14x PER. Maintain BUY.
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