DBS Group Research, May 29
TAT Hong Holdings reported FY13 revenue of S$837 million and earnings of S$70 million, which were in line with our forecasts.
Revenue grew 16 per cent, driven by stronger tower and mobile crane rental segments, which rose 27 per cent and 37 per cent respectively through better utilisation and rental rates.
Tat Hong declared final dividend per share (DPS) of 2.5 cents, bringing full-year DPS to four cents. This was a surprise as we had expected a total DPS of 2.5 cents, similar to last year's.
Infrastructure developments regionally continue to be robust.
In Singapore, the construction of the Thomson MRT Line will commence in H2 2013; there are other rail projects in Asean, such as in Malaysia and Thailand. We expect Tat Hong to be actively supplying its cranes for these projects.
We expect both rental rates and utilisation rates to remain strong, given buoyant demand for cranes in regional infrastructure projects.
We are leaving our earnings estimates and TP intact. Valuations remain compelling, with the stock trading at an attractive 10x FY14 forecasted earnings currently.
Our S$1.80 TP is based on 12x FY14F earnings. Maintain "Buy" for 19 per cent upside.
BUY
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