Dip In Tat Hong’s 2Q Earnings

tat hong logo  Tat Hong Holdings Limited (SGX: T03) released its 1QFY2014 results yesterday after market close. Tat Hong, the world’s largest crawler crane company, saw its net profits slumped 51% year-on-year (yoy) to S$ 12.3m on the back of revenue falling 18% yoy to S$ 175.5m.

A clearer picture can be formed for the decline in earnings as we zoom in on Tat Hong’s 4 business segments. Tat Hong’s revenue is generated from its 4 related business activities, Crane Rental, Distribution, General Equipment Rental, and Tower Crane Rental.

Lower earnings were recorded across all the divisions except for tower crane rental largely due to a slowdown in Australia’s economy due to weak commodity prices. In addition, price competition, high depreciation and transport costs also eat into the profit margins across all divisions. Tat Hong’s 1Q net profit margin stands at a mere 4.7%, a decrease from 7.8% as of last year.

Commenting on the results – Mr Roland Ng, Tat Hong’s Managing Director and Group CEO, said: “We remain confident about our crane rental business as the dip in revenue in the first quarter was the result of a number of our cranes being off-hire or in the process of being deployed to new projects.

He continued: “The demand for crane rental services in the region continues to be encouraging, underpinned by a strong pipeline of projects especially in the infrastructure and oil and gas space. In Australia, our committed contracts from the LNG projects should offer good employment for our cranes even as weak economy conditions are expected to prevail in the country.”

No dividends were declared this quarter. At Wednesday’s closing price of S$1.09, Tat Hong is trading at 10.51 times earnings and offers a dividend yield of 3.67%. Given that lacklustre market conditions for its key markets not going to subside soon, the financial performance of Tat Hong is likely to be tricky going forward.

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