SINGAPORE (Sept 20): OCBC is ceasing coverage on crane rental firm Tat Hong Holdings on prolonged worries with the group’s overall recovery and internal reallocation of resources.
The research house last rated the counter at “hold” with a fair value estimate of 37 cents.
See: Tat Hong kept at ‘hold’ by OCBC as outlook remains mixed
In a Wednesday report, lead analyst Jodie Foo looks back on the Tat Hong’s mixed performance across its main business segments over the past few years, and notes that group’s 1Q18 results continued to show weakness.
See: Tat Hong 1Q losses widen 42% to $5.1 mil
The group’s soft outlook comes despite some positive signs over the latest quarter, which include strong utilisation rates from its Tower Crane Rental division, as well as an improvement in the Australian General Equipment Rental division’s utilisation rates on the back of longer hire periods and new projects.
“Distribution revenue had better sales in Australia but lower demand for other markets, while we keep in mind that segment’s contributions can be lumpy,” says Foo.
“Management has noted some early signs of improved market sentiments in its key market Australia. The group also expects continued healthy demand in China, which bodes well for the Tower Crane Rental division. However, weakness in ASEAN countries is likely to continue weighing on performance for its Crane Rental division. Thus against this backdrop, the group will continue with its cost control initiatives and fleet rationalisation exercise,” she adds.
As at 3.05pm, shares in Tat Hong are trading flat at 38 cents.
