Tat Hong reported revenue and net profit to shareholders of S$837m (+16%) and S$70m (+67%) respectively for FY13. The results were in line with ours and the street’s estimates. Gross profit margin improved to 37.6% for FY13 (FY12: 36.5%) due to greater contribution from the higher-margin Crane Rental and Tower Crane businesses. Although the outlook for its key markets remains positive, management believes it is time to slow down its fleet expansion, after a 79% surge in fleet tonnage in the past 5 years. It will now focus on raising its crane productivity, and reducing operating costs through the use of its new yard in Iskandar. Although this may mean more a modest PATMI growth rate of about 10%, the improving cashflow would also bring its gearing level to a more sustainable level. Maintain BUY with unchanged S$1.75 fair value estimate.
FY13 within expectations
Tat Hong reported revenue and net profit to shareholders of S$837m (+16%) and S$70m (+67%) respectively for FY13. The results were in line with ours and the street’s estimates. Gross profit margin improved to 37.6% for FY13 (FY12: 36.5%) due to greater contribution from the higher-margin Crane Rental and Tower Crane businesses. The group also recorded a disposal gain of S$9.3m and wrote off inventory and trade receivables worth S$6.0m in the last financial year. It proposed a final dividend of 2.5 S cts, bringing its total dividend to 4.0 S cts for FY13 (FY12: 2.5 S cts).
Healthy level of infrastructure activities
Revenue for the Crane Rental segment jumped 37% to S$307m in FY13, driven by strong crane demand in its key markets (Singapore, Malaysia, Hong Kong, etc). The China Tower Crane Rental posted a 27% increase in revenue to S$75m due to improved utilization on a larger fleet. Revenue growth for Distribution was more modest at 7% (to S$362m), attributable mainly to higher sales in Singapore, Thailand and Indonesia; but partially offset by weakness in Australia. The only laggard was the General Equipment division, which suffered a 4% contraction resulting from more subdued activities in Australia.
Digesting its fleet expansion
The outlook for its key markets remains positive, underpinned by a number of infrastructure projects. However, management believes it is time to slow down its fleet expansion, after a 79% surge in fleet tonnage in the past 5 years. It will now focus on raising its crane productivity, and reducing operating costs through the use of its new yard in Iskandar. Although this may mean more a modest PATMI growth rate of about 10%, the improving cashflow would also bring its gearing level to a more sustainable level. Maintain BUY with unchanged S$1.75 fair value estimate.
Tat Hong reported revenue and net profit to shareholders of S$837m (+16%) and S$70m (+67%) respectively for FY13. The results were in line with ours and the street’s estimates. Gross profit margin improved to 37.6% for FY13 (FY12: 36.5%) due to greater contribution from the higher-margin Crane Rental and Tower Crane businesses. The group also recorded a disposal gain of S$9.3m and wrote off inventory and trade receivables worth S$6.0m in the last financial year. It proposed a final dividend of 2.5 S cts, bringing its total dividend to 4.0 S cts for FY13 (FY12: 2.5 S cts).
Healthy level of infrastructure activities
Revenue for the Crane Rental segment jumped 37% to S$307m in FY13, driven by strong crane demand in its key markets (Singapore, Malaysia, Hong Kong, etc). The China Tower Crane Rental posted a 27% increase in revenue to S$75m due to improved utilization on a larger fleet. Revenue growth for Distribution was more modest at 7% (to S$362m), attributable mainly to higher sales in Singapore, Thailand and Indonesia; but partially offset by weakness in Australia. The only laggard was the General Equipment division, which suffered a 4% contraction resulting from more subdued activities in Australia.
Digesting its fleet expansion
The outlook for its key markets remains positive, underpinned by a number of infrastructure projects. However, management believes it is time to slow down its fleet expansion, after a 79% surge in fleet tonnage in the past 5 years. It will now focus on raising its crane productivity, and reducing operating costs through the use of its new yard in Iskandar. Although this may mean more a modest PATMI growth rate of about 10%, the improving cashflow would also bring its gearing level to a more sustainable level. Maintain BUY with unchanged S$1.75 fair value estimate.
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