Tiong Woon Corp -
completed the sale of their loss making shipyard in Bintan yesterday
■ Tiong Woon Corp (TWC) has finally completed the sale of their loss making shipyard in Bintan yesterday.
■ This is a very positive development as the shipyard lost close to $3mln last year and was sold for $18mln, reaping them a one-time gain of $2.7mln.
■ TWC’s cash holdings will be increased by 75% from $24mln to $42mln.
■ Net gearing will improve from 33% to a healthy 25%.
■ This will come in handy to fund the company’s expansion plans as management seeks to expand into the Iskandar region to capitalize on the region’s expected construction boom over the next few years.
■ As well, management is contemplating expanding their Singapore facilities as their current operating space is getting tight based on their current runrate and orders.
■ This is because a key customer of TWC, Rotary Engineering has secured a record order book of just over $1bln, which is expected to be delivered over the next 2 years.
■ Other oil related customers such as Total, Sinopec and Shell are also expanding aggressively in Tuas (Singapore Lube Park).
■ After the sale of the loss making yard, this year (ending June’14) will benefit from the absence of close to $3mln in operating losses attributed to the yard.
■ This will see TWC easily achieving our 25% net profit growth projection for full year ending June’14 of $22.5mln, translating to a forward PE of 7x.
■ This is undemanding relative to its growth prospects of 25% as well as peers such as Tat Hong’s 10x and Hiap Tong’s 9x. ■ TWC’s NTA of 52 cents means its price to book is only 0.65x and we note that its assets have not been re-valued and are kept at historical cost.
■ If TWC can trade up to its peer group average PE of 9.5x, there is potentially an upside of 36% to 46 cents, which would still put it at a discount to its NTA of 52 cents.
■ We maintain BUY.
Publish date: 08/10/13