Net Profit at Tat Hong Down for Third Quarter

tat hong logoTat Hong Holdings Limited (SGX: T03), reported a 19% year-on-year decline in its revenue to S$167.4 million for the third quarter. The net profit decreased 32% year-on-year to S$12.1 million.

Tat Hong is the largest crane company in the Asia Pacific region with a fleet of more than 1,500 crawler, mobile and tower cranes. It deals with crane rental, tower crane rental, distribution, and general equipment distribution. The company not only serves the construction sector in Singapore, but also the infrastructure, oil and gas, mining, resources, engineering sectors across Southeast Asia, Australia and China.

The firm has four business divisions – Crane Rental, Tower Crane Rental, General Equipment Rental and Distribution –and all the business divisions, turned in a poorer performance in terms of revenue, except for the Tower Crane Rental division.

Other operating income posted a 186% increase to S$14.9 million as the firm booked a one-off S$12.9 million gain from the “assignation and nomination of purchase rights for a 25-acre plot of industrial land in Iskandar, Malaysia”.

The net profit declined 32% mainly due to poor performances from its subsidiaries in Australia and Indonesia.

As of 30th December 2013, the company sat on a cash balance of S$72.4 million and had a total debt of S$480.8 million. Therefore, it is in a net debt position of S$408.4 million.

For the quarter, the company generated S$49.6 million of net cash for operating activities as compared to S$12.4 million generated in the previous year.

Mr Roland Ng, Tat Hong’s Managing Director and Group Chief Executive Officer, said, “The slowdown in our single largest market, Australia, continued to widen and deepen. This, together with a volatile currency, high interest rates and a weak commodities sector in Indonesia has hurt our third quarter bottomline. Given the difficult operating environment in Australia and Indonesia and in the face of rising costs and increasing competition, we have made cost containment, improving operational efficiency and increasing the returns on our assets key priorities in the short to medium-term.”

The firm is positive about the long-term prospects of its crane rental business due to the pipeline of planned infrastructure and oil and gas projects in the region.

The shares of Tat Hong closed at S$0.785 on Thursday. It is trading at 7 times its historical earnings and has a dividend yield of 5%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.