Tat Hong Holdings' recovery gains ground

With a net profit increase of 63% and a reallocation of assets to a better managed subsidiary, the Group is seeing better prospects.

The Group's Gross margins also improved to 36.5% due to better rental rates and higher utilizations of its cranes. Its business segments' Distribution and General Equipment Rental saw growth as well. Only its Tower Crane Rental saw flattish prospects.

Here's more from OCBC Investment Research:

Tat Hong Holdings reported a good set of 4Q12 and FY12 results that were above consensus’ estimates but within our expectations. FY12 revenue grew by 23% to S$720m, while net profit attributable to shareholders jumped by 63% to S$42m. Gross margins improved to 36.5% due to better rental rates and higher utilizations of its cranes. TAT also recommended a final dividend of 1.5 S cts per share.

Strong recovery in most business segments
TAT reported that all its business divisions, except Tower Crane Rental, had experienced double-digit revenue growth during the past year. Revenue for the Distribution and General Equipment Rental segments grew by 25% and 39% respectively, driven by strong recovery activities post natural disasters and increased infrastructure/mining activities in Australia. Revenue from Crane Rental jumped 22%, helped by increased demand in Singapore, Malaysia and Hong Kong.

Restructuring of Chinese operations
Despite flattish growth at 3% YoY in its Tower Crane Rental division for FY12, the group had made significant progress in restructuring its China operations. Among other measures, it has effectively reallocated its crane assets from an underperforming subsidiary, Sichuan Tat Hong Yuan Zheng, to a better managed subsidiary, Shanghai Tat Hong Equipment Rental. Although this process had led to an S$8m accounting loss in FY12, the group should be better positioned to grow its operations in China going forward.

Management is optimistic about its prospects and sees strong demand growth for Singapore, Australia, Hong Kong and other Southeast Asia markets.

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