SINGAPORE (17 Aug): OCBC is maintaining its “hold” rating on Tat Hong Holdings with a fair value of 37 cents.
This followed the announcement of the group’s 1Q18 results which revealed softness in its business with some bright spots.
Despite the group’s widening loss of $5.1 million mainly due to the absence of tax benefits in this quarter, it reported a 1% y-o-y increase in revenue to $118.3 million.
See: Tat Hong 1Q losses widen 42% to $5.1 mil
The slight increase in revenue was supported by improved performance across all business segments except the Crane Rental division, led by weaker performance in Singapore, Batam and Hong Kong markets.
Gross profit declined 13% to $30.4 million.
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In a Thursday report, analyst Jodie Foo says that the group’s utilisation rates in China and Australia are strong.
The group’s operations in China saw about 81% utilisation rates in its Tower Crane Rental segment with involvement in projects across various sectors.
Meanwhile, better utilisation rates were reported in Australia with longer hire periods as well as new projects starting especially in the infrastructure space in the group’s General Equipment Rental division.
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The management said that the “silver lining” is the increase in EBDITA to $3.6 million in 1Q18 from $0.2 million in 4Q17.
Pre-tax losses also narrowed to $3.3 million from $3.8 million on the back of lower operating expenses and better contributions from associated companies and joint ventures.
In addition, management has noted some early signs of a turnaround for its Australian subsidiary Tutt Bryant Group, particularly in their general equipment rental and distribution businesses.
“Nevertheless, the early positive signs are underpinned by a rebound in infrastructure construction and improving market sentiments,” says Foo.
Tat Hong says it will be continuing its cost control initiatives and fleet rationalisation exercise as the Asean market is still facing weakness and competitive pricing pressures.
As at 11.50am, shares in Tat Hong are trading 1 cent lower at 36 cents.
