Tat Hong issued a profit guidance statement last Friday evening as the group expects to report a loss for 4QFY15, attributed to weak performance of its Australia wholly-owned subsidiary amid challenging business conditions. Hence, the group is also expected to recognise significant charges for the impairment of goodwill and assets. With that said, the group expects to remain profitable for FY15, citing a stable underlying performance. We note that performance in Australia had remained a concern over the past quarters. Given the muted outlook for its key market, we reduce our fair value from S$0.75 to S$0.63. However, as its share price has fallen by ~18% over the past five months, we think that the negatives may have been priced in. Thus, we maintain our HOLD rating, while we wait for further details when results are released on or around 29 May.
Expects net loss for 4Q; Still profitable for full-year
Tat Hong issued a profit guidance statement last Friday evening as the group expects to report a loss for 4QFY15, attributed to weak performance of its Australia wholly-owned subsidiary amid challenging business conditions due to the slowdown in Australia’s economy and mining sector. Hence, the group is also expected to recognise significant charges for the impairment of goodwill and assets, which is non-cash in nature. With that said, the group expects to remain profitable for FY15, citing a stable underlying performance.
Picture to possibly stay the same
With operations in Australia contributing to about 44% of the group’s total revenue, we noted in our last report that its performance there remained a concern. Meanwhile, we did see higher revenue contribution from SEA countries and Hong Kong, and stable crane rental revenue was achieved in Hong Kong and Thailand. Segment wise, topline growth could continue to be supported by its Tower Crane rental segment in China while the other divisions (Crane rental, Distribution, General Equipment rental) may stay largely unexciting.
Plans to improve operating efficiency
In the past month, Tat Hong had announced the disposal of its properties in Singapore and Malaysia, which would give gains of S$4.1m and RM11.5m (~S$4.2m), respectively. With the aim to improve operating efficiency, the disposals are a result of plans to consolidate its Singapore operations in the Tuas area as well as a relocation of operations to larger premises in Johor, Malaysia.
Maintain HOLD
Due to the muted outlook for its key market, a net loss in 4QFY15 and lower growth in FY16, we reduce our fair value from S$0.75 to S$0.63. However, as its share price has fallen by ~18% over the past five months, we think that the negatives may have been priced in. Thus, we maintain our HOLD rating, while we wait for further details when results are released on or around 29 May.
Tat Hong issued a profit guidance statement last Friday evening as the group expects to report a loss for 4QFY15, attributed to weak performance of its Australia wholly-owned subsidiary amid challenging business conditions due to the slowdown in Australia’s economy and mining sector. Hence, the group is also expected to recognise significant charges for the impairment of goodwill and assets, which is non-cash in nature. With that said, the group expects to remain profitable for FY15, citing a stable underlying performance.
Picture to possibly stay the same
With operations in Australia contributing to about 44% of the group’s total revenue, we noted in our last report that its performance there remained a concern. Meanwhile, we did see higher revenue contribution from SEA countries and Hong Kong, and stable crane rental revenue was achieved in Hong Kong and Thailand. Segment wise, topline growth could continue to be supported by its Tower Crane rental segment in China while the other divisions (Crane rental, Distribution, General Equipment rental) may stay largely unexciting.
Plans to improve operating efficiency
In the past month, Tat Hong had announced the disposal of its properties in Singapore and Malaysia, which would give gains of S$4.1m and RM11.5m (~S$4.2m), respectively. With the aim to improve operating efficiency, the disposals are a result of plans to consolidate its Singapore operations in the Tuas area as well as a relocation of operations to larger premises in Johor, Malaysia.
Maintain HOLD
Due to the muted outlook for its key market, a net loss in 4QFY15 and lower growth in FY16, we reduce our fair value from S$0.75 to S$0.63. However, as its share price has fallen by ~18% over the past five months, we think that the negatives may have been priced in. Thus, we maintain our HOLD rating, while we wait for further details when results are released on or around 29 May.
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