Monday, August 19, 2013

Tat Hong : Australia disappoints (DBSV)

Tat Hong,
Hold, Downgrade from BUY  S$1.09,
Australia disappoints
Price Target : 12-month S$ 1.00 (Prev S$ 1.43)

•1Q14 below as Australia underperforms
•Australia outlook remains uncertain leading up to elections in September
•Cut FY14F/FY15F earnings by 46%/26%
•Downgrade to HOLD , TP cut to S$1.00

Below expectations as Australia underperforms.  TAT returned a poor set of 1Q14 results, missing our and consensus expectations.  Earnings came in at only S$8.2m (-51% y-o-y), dragged by Australia’s poor performance.  Revenue declined 18% y-o-y to S$176m, due to declines in Distribution, Crane Rental and General Equipment Rental segments.  Gross margins shrank 2.8ppts to 36.4%.  1Q14 earnings contributed to only 11% of our initial forecast.

Poor visibility for recovery in Australia until after elections.   We believe the weak operating environment in Australia will continue until at least the federal elections in September. Outlook for Australia will become clearer once the elected government outlines and implements its intended policies to develop and kick start the economy.  

Cut earnings by 46%/26% in FY14F/FY15F.  We factor in the poor 1Q14 results and a more conservative revenue growth outlook in Australia due to lower crane utilisation and rental rates in FY14F, followed by a pick-up in activities in FY15F.

Downgrade to Hold , TP cut to S$1.00. Following our earnings revision, our TP is lowered to S$1.00 based on 12x blended FY14F and FY15F earnings. Downgrade the stock to Hold given limited upside.

Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 14/08/13

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