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Falling Knife of the Week: Hiap Tong Corporation

knife

Hiap Tong Corporation (SGX: 5PO) has fallen by 9.1% to $0.16 at the time of writing (11:45m, 20 June 2014) since last Friday’s close. This makes it this week’s Falling Knife.

For more than 30 years, Hiap Tong has been an integrated one-stop provider of a wide range of lifting and haulage services for the marine, petrochemical and construction industries in Singapore.

The firm boasts the largest range of lifting capabilities in the hydraulic mobile crane category. It has a customer base of more than 200 customers, with some notable ones being business units and affiliates of SembCorp Industries Limited (SGX: U96), Keppel Corporation Limited (SGX: BN4) and Rotary Engineering Limited (SGX: R07).

Two weeks ago, on 4 June, shares of the firm had surged by 20.9% and this prompted stock exchange operator Singapore Exchange to issue a query regarding Hiap Tong’s unusual trading activity. The firm said that it was unaware of any information not previously announced which might possibly explain such trading.

When asked about other possible explanations that might justify the sharp spike in price, Hiap Tong explained that, “From time to time, the management of the Company would receive referrals to meet up with parties who are interested to invest in the Company. As at the date of this announcement, no agreement has been entered into with any party from those meetings”.

At the end of May, the company announced its full year results. Revenue for the financial year ended 31 March 2014 rose 18.7% to hit S$45.7 million, mainly due to higher leasing income, which was brought about by a higher number of owned equipment; during the year Hiap Tong’s lifting fleet had increased from 127 cranes to 132 cranes while its haulage fleet had grown from 143 vehicles to 170 vehicles.

Despite the top-line growth, the company’s net profit went south to S$3.9 million as compared to S$4.6 million in the previous year. This was mainly due to higher cost of sales for the year.

Mr Ong Teck Meng, Executive Chairman and Chief Executive Officer of the firm commented on the results, saying, “We are currently operating in a very challenging environment due to the current crane excess situation. However we will focus on strengthening our market position and will strive to improve on our operational efficiency.”

Currently, Hiap Tong is trading at 13 times its historical earnings.

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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.