Share Price S$0.350
Earnings growth on track with possible one-time gain in 2Q14.
• TWC reported an 11% yoy increase in net profit to S$4.6m in 1Q14, driven by a rise in revenues and margins from the Heavy Lift and Haulage and Trading segments. Total revenue rose 3% yoy to S$44.6m and gross profit jumped 30% to S$14.8m with gross profit margin improving to 33% from 26% in 1Q13. The Heavy Lift and Haulage segment recorded a 6% yoy increase in revenue to S$36.3m and contributed 81% of the Group’s revenue.
• According to management, the company should see a slight improvement in utilisation rate after deploying two heavy tonnage cranes into Russia. On top of this, TWC will also be actively seeking oil and gas, petrochemical, power and construction projects in Myanmar, Vietnam and India.
• To reduce operating costs, TWC is currently evaluating the tenders for the re-development of the new office and warehouse space at 15 Pandan Cresent. This property will add 1ha of parking space on the rooftop as well as a 500-bedded workers’ dormitory. The company expects to lower their total manpower costs and there is also a possibility of renting out half of their dorms.
• TWC has sold its loss-making subsidiary Tiong Woon Oil & Gas Services Pte Ltd for a sum of S$18.0m. The subsidiary is in the business of marine fabrication and engineering works for oil and gas projects but has faced several challenges in getting new contracts due to a lack of track record. With the disposal, the company is likely to record a gain on disposal of approximately S$2.7m in the next quarter.
• We re-iterate that Tiong Woon is not a pure crane rental operator. Tiong Woon differentiates itself from other crane operators by providing a comprehensive project management service apart from bare crane rental. These service project contracts are longer term in nature (rates are locked in) and therefore, earnings are theoretically less volatile in nature.
• Tiong Woon (TWC) is trading at a 33% discount to its book value of 52.2 S cents with a dividend yield of 1.1%. As at 30 Sep 13, Tiong Woon had a fleet of 431 cranes in lifting assets, 262 vehicles and equipment in haulage assets and 17 tugs and barges in marine assets.
Publish date: 22/11/13