Tat Hong

Tat Hong: The HK govt, led by new chief executive Leong Chun Ying, is reportedly considering a proposal to ramp up the number of new flats to 50k /yr (over a 2-3yr period). This far exceeds the 18k flats built in FYMar12 and the 35k flats target set by the previous Donald Tsang govt for the coming years. If the plan passes, OCBC believes there may be a surge in the territory’s crane demand; and Tat Hong Holdings – with one of the largest crane fleet in Asia – would be one of the prime beneficiaries. The house notes even without the proposal to ramp-up new flats, HK is already experiencing a strong pick-up in construction activity driven by a number of large infrastructure projects. Annual actual expenditure on capital works has tripled to HK$62.3b in 2012-13 (2007-08: HK$20.5b) and is expected increase further to over HK$70b/ yr over the next few years. Outside of Hong Kong, OCBC expects a high and sustained level of construction activities in Singapore (Downtown Line, Ophir-Rochor) and Malaysia (Iskandar Malaysia). The house believes Tat Hong’s Australia operations are expected to recover strongly driven by post-disaster reconstruction activities. In China, the group restructured its operations and is now better positioned for growth. Maintains Buy with TP $1.21.