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Tat Hong: No Lift Seen In FY14
Tradeable, Tradeable Ideas | 05 June 2014
By: Raymond Leung
Articles (142) Profile

1. As major projects for Tat Hong comes to completion, the group’s net profit took a plunge of 54 percent to $32.8 million.

2. While the group managed to hold up with its tower crane rental, all other divisions reported a fall in revenue.

3.  Businesses of Tat Hong Holdings expected to take a slow pace as resources in Australia face strong and increasing competition.

Tat Hong Holdings (Tat Hong) released its full year results last week which disappointed the market. Revenue for FY14 fell by 18 percent to $684 million while net profit decreased by a sharp 54 percent to $32.8 million.

Revenue for all divisions fell with the exception of tower crane rental as the group reports lower business activity. This comes as major projects for Tat Hong in Malaysia and Papua New Guinea completes.

However, profit margin for Tat Hong maintained as it fell by a mere 1.3 percentage points to 36.8 percent. This showed the ability for the group to manage its costs despite the increasing pressure.

The main hit for its substantially lowered profit came as lower contribution was reported from Australia. This was due to weak economy and slowdown in the local resources sector. Sustained losses from its Indonesian subsidiaries and impairment of $3.4 million from an associate company were reflected in FY14.

For the coming FY, business for Tat Hong is expected to be slow as the group faces a lower take-up rate. The resource sector in Australia will be facing strong headwinds and increasing competition in its businesses.

In view of the recent poor performance and less than positive outlook, analysts from CIMB Research remained bearish on Tat Hong. They maintained their “Sell” call with a potential downside of 7.69 percent.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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