Tat Hong

Tat Hong: 4QFY14 results came in below estimates, as net profit plunged 77% to $4.2m taking FY14 net profit to $32.8m (-53%). Revenue for the quarter fell 22% to $155.9m (-22%) largely due to a 33% decline in Distribution revenue to $60.3m and 20% decline in Crane rental revenue to $57.9m. This was offset partially by a 35% rise in Tower Crane rental revenue to $23.3m. Gross margin came in at 36.8% versus 38.1% from the previous year, with the Crane Rental and Tower Crane Rental divisions posting lower margins, partially mitigated by improved margin from the General Equipment Rental division whilst margin from the Distribution division remained stable. Bottom-line was further weighed by a 23% rise in distribution expenses to $8.9m, cushioned slightly by a 43% rise in other income to $5.1m, led by gains on the disposal of a subsidiary in Singapore and government subsidies received. Management note that FY14 was a challenging year for Tat Hong as all its markets, with the exception of China, did not perform well. The group however remains optimistic of its future prospects as Asia’s infrastructure requirements are estimated at US$750b a year till 2020, with Tat Hong, well-placed to participate in this infrastructure ramp up. The group further expects performance at its Australian subsidiary to perform better this year as urban infrastructure and major LNG projects are expected to pick up momentum, and remain cautiously optimistic that all its other markets will perform better in FY15. Tat hong has declared a dividend of 1¢ per share, taking FY14 payout to 2¢ per share, half that of the 4¢ declared in FY13. At the current price, Tat Hong trades at 16.4x FY14 P/E. Latest broker ratings as follow: CIMB downgrade to Reduce from Hold with TP $0.72 OCBC maintains Hold with TP $0.89