Tat Hong Holdings (Tat Hong) reported a set healthy set of 3Q12 results with revenue and net profit increasing by 43% and 178% YoY to S$196m and S$13m respectively, attributable mainly to higher levels of activity across all divisions. Over a nine months period, net profit was S$31m (a 40% YoY increase), and represented 71% of our FY12F estimates. As the 3Q12 results marked a fourth consecutive quarter of improvement and with net margins reverting back to 6-7% (4Q11: 2.5%; 1Q12: 3.5%; 2Q12: 6.9%; 3Q12: 6.6%), we are optimistic of a steady recovery. Maintain BUY with unchanged fair value estimate of S$1.09 (on 10x FY13F EPS).
Healthy set of 3Q12 results.
Tat Hong Holdings (Tat Hong) reported a set healthy set of 3Q12 results with revenue and net profit increasing by 43% and 178% YoY to S$196m and S$13m respectively, attributable mainly to higher levels of activity across all divisions. Over a nine-month period, net profit was S$31m (a 40% YoY increase), and represented 71% of our FY12F estimates. As the 3Q12 results marked a fourth consecutive quarter of improvement and with net margins reverting back to 6-7% (4Q11: 2.5%; 1Q12: 3.5%; 2Q12: 6.9%; 3Q12: 6.6%), we are optimistic of a steady recovery.
Broad based improvement in 3Q.
Revenue growth was seen across all divisions, but the strongest contribution was from Distribution which grew by 62% YoY to S$97m supported by higher sales in Indonesia, Vietnam and Australia. Crane Rental increased by 31% YoY to S$57.7m on the back of increased infrastructure activities in Singapore, Malaysia and Hong Kong. General Equipment Rental also saw a strong 33% improvement in revenue to S$25.5m, on the back of recovery efforts and continuing demand in Australia. Finally, Tower Crane Rental increased by 14% due to fleet expansion. Overall gross margin was maintained at 34.4% (3Q11: 34.4%), largely due to lower distribution margins offsetting higher margins in other segments.
Maintain BUY with S$1.09 unchanged fair value estimate
Tat Hong believes that the outlook for its Australian operations (which represented more than half of total revenue) is positive with strong demand for equipment and services arising from the rebuilding efforts after the natural disasters. Other markets such as Singapore and Hong Kong also appear to be encouraging. However, as we have already factored in a recovery in our previous assumptions, we are keeping our FY13F estimates intact. Maintain BUY with unchanged fair value estimate of S$1.09 (on 9x FY13F EPS).
Tat Hong Holdings (Tat Hong) reported a set healthy set of 3Q12 results with revenue and net profit increasing by 43% and 178% YoY to S$196m and S$13m respectively, attributable mainly to higher levels of activity across all divisions. Over a nine-month period, net profit was S$31m (a 40% YoY increase), and represented 71% of our FY12F estimates. As the 3Q12 results marked a fourth consecutive quarter of improvement and with net margins reverting back to 6-7% (4Q11: 2.5%; 1Q12: 3.5%; 2Q12: 6.9%; 3Q12: 6.6%), we are optimistic of a steady recovery.
Broad based improvement in 3Q.
Revenue growth was seen across all divisions, but the strongest contribution was from Distribution which grew by 62% YoY to S$97m supported by higher sales in Indonesia, Vietnam and Australia. Crane Rental increased by 31% YoY to S$57.7m on the back of increased infrastructure activities in Singapore, Malaysia and Hong Kong. General Equipment Rental also saw a strong 33% improvement in revenue to S$25.5m, on the back of recovery efforts and continuing demand in Australia. Finally, Tower Crane Rental increased by 14% due to fleet expansion. Overall gross margin was maintained at 34.4% (3Q11: 34.4%), largely due to lower distribution margins offsetting higher margins in other segments.
Maintain BUY with S$1.09 unchanged fair value estimate
Tat Hong believes that the outlook for its Australian operations (which represented more than half of total revenue) is positive with strong demand for equipment and services arising from the rebuilding efforts after the natural disasters. Other markets such as Singapore and Hong Kong also appear to be encouraging. However, as we have already factored in a recovery in our previous assumptions, we are keeping our FY13F estimates intact. Maintain BUY with unchanged fair value estimate of S$1.09 (on 9x FY13F EPS).
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