Tat Hong

Tat Hong: Reported a set of disappointing results. Revenue -18% y/y to $175.5m and net profit -51% y/y to $8.2. The decline was broad-based with revenue down in almost all divisions except a marginal improvement in Tower Crane Rental. Things not getting better soon in Australia, with ~53% (or $14m) drop in profit before tax this quarter mainly attributed to the weak Australian Dollar that affected Tat Hong across the board. Maybank-KE expect the weak performance there to continue at least until the general election in September. But even after the general election, not confident that the govt spending on infrastructure and the overall economy can recover very soon. Crane Rental was also surprisingly weak, posting a 14% drop in revenue, as utilization rate also dropped to 65% from 74% y/y. Overall, Maybank-KE downgrades to Sell with new TP of $0.79, as house think the market will further de-rate the stock on a more bearish growth outlook. Add that the robust earnings rebound in the past two years has come to the end, and post this quarter’s shocking results, expect further de-rating in Tat Hong’s share price.