AmFraser Research, Nov 19
SIN Heng is one of the leading heavy lifting service providers in Singapore, focusing on the mid- to high-lifting capacity segment. Its core business is in the renting and trading of cranes, aerial lifts and other heavy lifting equipment.
It is the only crane operator among its listed peers that is actively engaged in the trading business. The trading segment, despite being a lower margin business, requires less capital to operate.
It is also an additional income source and ensures that the company's rental fleet be kept young and its crane products relevant.
Sin Heng provides an indirect opportunity for investors to gain exposure to the growth of emerging countries, and is likely to be a beneficiary of the boom in the region's infrastructure spending, with its branded crane equipment already the leading standard in the infrastructure arena.
Synergistic effects could be achieved from the partnership with Toyota Tsusho Corporation (TTC), which also holds a 27 per cent stake in the company.
The yen depreciation in the past year has benefited Sin Heng in the form of lower purchase costs. High quality Japanese cranes are also now more cost-competitive relative to China-made ones. Buyers will be more receptive to purchase these cranes from suppliers like Sin Heng due to the narrower cost disparity.
Initiate "buy" with FV (fair value) S$0.300. We forecast earnings to grow at a CAGR (compounded annual growth rate) rate of 20 per cent from 2013-15.
On a valuation of 9.4X (5-year historical mean) FY14 PE, we derive a TP of S$0.300, representing a 50 per cent upside from current level inclusive of an expected dividend yield of 3.9 per cent.
BUY
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