TatHong

TatHong: Disappointing 3Q results due to fall in net profit of $4.7m -59.7%yoy which was below estimates of $8-9m. Rev at $137.1m was +12.0% yoy but were affected by lower gross margins with 3Q11 at 34% (2Q margins were 37% and 3Q10 were 38%) affecting all divisions except General Equipment Rental. Despite increased rev from Tower Crane division (rev +62%) due to rental fleet size and higher utilization rates, increased competition impacted margins…

Other crane division utilization rate remained at 60-65% region and had fewer premium projects resulting in a lower margin (56% vs prev yr 63%) Difficult operating conditions particularly in Australia have lowered mgmt’s outlook for recovery and 4Q11 is expected to be weak. Citi downgrades to Sell with TP at $0.70 down from $1.15. Tat Hong is trading at relatively high 16.4x trailing P/E compared to hist avg of 10.9x