UOB Kay Hian analysts John Cheong and Heidi Mo are keeping their &ldquo buy&rdquo call on Tiong Woon Corporation BQM , but with a lower target price of 87 cents from 90 cents after the company&rsquo s FY2024 ended June results missed expectations.

 

On Aug 27, Tiong Woon reported a total profit of $18.3 million for the FY2024, 17% higher y-o-y, while revenue inched up by 5% y-o-y to $143.1 million.

 

The bottom line fell short of Cheong and Mo&rsquo s expectations by 14% due to the lower-than-expected revenue growth from project delays. Tiong Woon&rsquo s FY2024 revenue stood at 90% of Cheong and Mo&rsquo s forecasts.

 

That said, the company&rsquo s management remains upbeat on its outlook as it sees &ldquo buoyant demand&rdquo for its heavy lift and haulage services in Singapore, especially in the petrochemical and construction sectors and its other operating markets such as India, Saudi Arabia and Thailand.

 

&ldquo We expect Tiong Woon to continue to add on higher-margin heavier tonnage cranes to its fleet with its pipeline of business opportunities, as well as an uptick in utilisation as it meets customers&rsquo project requirements,&rdquo the analysts write in their Sept 24 report.

 

Tiong Woon is the 15th-largest crane-owning company globally as of June 30, up from 19th place in 2023. This demonstrates its &ldquo noticeable increase&rdquo in its crane fleet capacity and commitment to sustained growth, observe Cheong and Mo.

 

With this in mind, the analysts see a better FY2025 ahead with higher demand for construction in Singapore and growth in Tiong Woon&rsquo s regional markets. Singapore makes up 75% of the company&rsquo s revenue and annual construction demand in the country is projected to reach $31 billion to $38 billion from 2025 to 2028, according to the Building and Construction Authority (BCA).

 

In Thailand, Tiong Woon saw revenue increasing fourfold in two years to $6.2 million.

 

&ldquo Management has identified Thailand as a fast-growth market, and is taking on module and jacket fabricator projects which require significant heavy-lifting capabilities,&rdquo write Cheong and Mo.

 

Revenue from the Middle East has also doubled to $6.3 million and the analysts see &ldquo moderate growth&rdquo for the market as Tiong Woon continues to take part in projects in the region. In India, revenue may see a slowdown, however, as the monsoon period and logistical challenges have led to project delays.

 

To this end, the analysts still like Tiong Woon&rsquo s prospects thanks to its strong balance sheet. In FY2024, the company&rsquo s net gearing ratio more than halved to 3.8%, down from 8.1% in FY2023. The group has also consistently generated strong operating cash flows. In addition, it has a history of increasing its dividend payments since FY2018.

 

To be sure, the company proposed a record dividend of 1.5 cents per share in FY2024, up from 1 cent per share in FY2023. &ldquo We note that both absolute dividends and payout ratio have trended higher from FY18, in line with earnings per share (EPS) growth,&rdquo say the analysts. &ldquo We are of the view that Tiong Woon is well positioned to sustain its dividend payout ratio.&rdquo

 

Meanwhile, the analysts have lowered their FY2025 to FY2026 revenue estimates by 11% as project delays in the industry may persist. They have, however, raised their gross profit margin (GPM) estimates slightly by 1 percentage point as they expect to see greater use of Tiong Woon&rsquo s higher-margin heavy lifting cranes. Accordingly, the analysts&rsquo earnings forecasts for FY2025 and FY2026 have dropped by 5% and 7% respectively.

 

Cheong and Mo&rsquo s new target price is pegged to a lower FY2025 P/B of 0.6 times, down from 0.7 times its FY2024 P/B before. &ldquo This is based on 1 standard deviation (s.d.) above Tiong Woon&rsquo s historical 15-year average P/B, due to a solid earnings growth trajectory backed by the construction upcycle,&rdquo they say.

Tiong Woon Corp Holding has posted FY2024 ended June earnings of $18.2 million, 16% higher than the previous year.

 

Earnings per share for the year was also higher by 16% to 7.85 cents.

 

The company&rsquo s FY2024 revenue was up 5% y-o-y to $143.1 million, mainly due to the increase in contributions from the heavy lift and haulage segment.

 

Gross profit increased by 9% y-o-y to $59 million, while gross profit margin was up by 1.3 percentage points to 41.2%.

 

As at June 30, the company has a record strong cash position of $81.1 million. Net assets stood at $309.4 million, translating into a net asset value per share of $1.33.

 

Tiong Woon plans to increase its dividend by 50% to 1.5 cents per share.

 

&ldquo Our strategy to steer the group towards higher growth by enhancing our heavy lifting capabilities and operational excellence proved effective as demonstrated by the strong results achieved in FY2024. We will continue to navigate challenges, seize opportunities and chart towards a sustainable future,&rdquo says Tiong Woon executive chairman Ang Kah Hong.

 

Tiong Woon Corporation BQM 0.00% has announced its plans to expand its footprint in Thailand through a strategic alliance with Mammoet Asia, from which Tiong Woon has also successfully acquired various assets.

 

The company says the strategic move will bolster its operations and market position in Thailand, enhance its ability to cater to the evolving needs of existing customers in the region and significantly broaden its service offerings to existing as well as new customers, particularly within the heavy lift and haulage market in Thailand.  

 

According to Tiong Woon, the collaboration will also place both itself and Mammoet in a stronger position to offer, tender, negotiate and provide best-in-class solutions in projects in Thailand.

 

As part of the move, Tiong Woon has acquired assets from Mammoet including transportation, heavy haulage and heavy lifting equipment. 

 

The acquisitions will position and enable the company to undertake new, larger and more complex projects for existing and new customers, further solidifying its reputation as a go-to partner for high-value, complex and challenging heavy lift and haulage solutions in Thailand and the region, says Tiong Woon.

 

CEO Michael Ang says: &ldquo We are excited about the opportunities this strategic alliance and asset acquisition with Mammoet in Thailand brings to our organisation and our customers. This is yet another chapter in the group&rsquo s growth story in the right direction.&rdquo

 

&ldquo The investment also underscores our commitment to meeting the evolving needs of our customers and partners, and our vision for the group as the market leader in high-value, large, complex heavy lift and haulage solutions in Thailand and the broader region. We believe that this broadening of our strategic partnership with Mammoet in the Asia Pacific region augurs well for further growth in the region,&rdquo he adds.

 

Opportunities abound both at home and abroad as the construction sector picks up pace, says Michael Ang, chief executive officer of the crane specialist company

 

Tiong Woon chief executive officer Michael Ang points out that demand for its crane services remains robust amid a strong project pipeline. 

 

IT has been a fruitful few years for . While most in the construction industry have seen muted activity, especially during the pandemic, the crane specialist has been on a roll.

Profit has grown more than tenfold in the past six years. And the company&rsquo s chief executive officer Michael Ang believes there is more headroom for growth, particularly in key regional markets outside Singapore. 

 

Its winning formula: keep your head down and focus on your strengths. 


 
 
 


The labour crunch during the pandemic was challenging for Tiong Woon. &ldquo There was a deep slowdown in (construction projects) since many sites in Singapore were shut down due to labour shortages,&rdquo said Ang. &ldquo Our tower crane segment was pretty slow.&rdquo  

 

Restrictions during the pandemic also made operations more difficult a leaner workforce meant that projects were completed more slowly, Ang said. 

It was then that Tiong Woon started leveraging its niche expertise to enhance its competitiveness.

 

This included concentrating on medium-duty cranes with a load capacity of up to 600 tonnes. These hefty cranes are more specialised than mass market ones, which have a load capacity of up to 100 tonnes and are more easily accessible. 

 

Operators of these cranes therefore need a good track record and know-how in handling them, especially since the equipment is expensive, critical in projects, and takes a long time to manufacture, Ang said. 

 

Safety requirements for such heavy equipment are more stringent too, he noted. But that was not an issue for Tiong Woon. &ldquo Our guys have been lifting loads, big or small, for so many years. This is our bread and butter.&rdquo  

 

While managing operating costs and business risks, Ang said, the group prioritised &ldquo adequate liquidity&rdquo and a &ldquo strong cash flow&rdquo .

 

The strategy proved successful. 

 

Profit more than doubled to S$7.6 million in 2020 &ndash when the pandemic first set in &ndash from S$2.9 million the year before.

 

The group&rsquo s earnings more than doubled again through the pandemic, to S$15.7 million for the latest FY2023 ended June.

 

Ang attributed much of the growth to success in the Singapore market, which recovered relatively quickly from the pandemic. The city-state was responsible for around 77 per cent of total revenue in the latest financial year.

 

Reaching for overseas growth

 

Although recovery in the crane specialist&rsquo s overseas operations has been more subdued, Ang is confident that there will be more growth opportunities in the coming few years. This is especially so in key markets such as India and Saudi Arabia, he said. 

 

Tiong Woon continues to receive &ldquo strong customer enquiries&rdquo for crane services in these markets &ndash particularly in the construction, oil and gas, petrochemical and infrastructure sectors &ndash amid a still &ldquo strong project pipeline&rdquo , he said.

 

In India, for instance, Tiong Woon was recently awarded two major contracts to provide heavy lifting services at sites such as a fertiliser plant.

 

In Saudi Arabia, the group currently provides heavy lifting services at around four &ldquo high-profile&rdquo sites, including a refinery site. There are other sites that are contracted on an ad-hoc basis.

There is also talk about The Line, a car-free linear city planned within Saudi Arabia&rsquo s US$500 billion mega-development project in Neom. Plans include an industrial city and a mountain sky resort. 

 

&ldquo They are still working on the foundation (of the project), but we hope to participate in it since we already have a foothold there,&rdquo said Ang. &ldquo Depending on how these major projects take shape and the timeline for it, the Saudi market could be quite robust for us.&rdquo  

 

On the home front, Ang highlighted that there is a healthy pipeline of potential projects as construction demand rebounds. &ldquo The Housing and Development Board (HDB) is churning out more units to meet demand. That&rsquo s an area that we&rsquo re quite competitive in, so we should have several projects coming up in the next one to two years.&rdquo  

 

Building its reputation

 

In an Oct 25 report, Lim & Tan Securities analysts also noted that in the past few years, Tiong Woon has beaten international heavyweights, such as Mammoet and Sarens, to win contracts. 

&ldquo The regions that Tiong Woon operates in are facing tailwinds from the higher construction demand post-Covid, higher oil prices and final investment decisions that were not present since 2014 (when oil prices crashed),&rdquo Lim & Tan said.

 

Even with record high profits, the analysts believe that Tiong Woon is &ldquo far from the cycle peak&rdquo and is trading at &ldquo distressed valuations&rdquo .

 

The analysts added: &ldquo The time for a sector rating is imminent, and Tiong Woon remains the cheapest and the biggest laggard in the construction industry, which should translate into supernormal gains for investors in time to come.&rdquo

 

Still, some challenges lie on the horizon. 

 

Finance costs, for instance, jumped 42.8 per cent to nearly S$4 million in FY2023, from S$2.8 million in the previous year. This was mainly due to the higher cost of borrowing, and could prove an obstacle should the US Federal Reserve raise interest rates yet again, said Ang. 

 

There are also geopolitical tensions, growing inflationary pressures and concerns about global economic growth, which may adversely affect Tiong Woon. 

 

Nonetheless, Ang remains optimistic about the group&rsquo s prospects.  

 

To protect itself, Tiong Woon is now more selective in the projects it takes on, stepping up its credit assessment of potential clients, he said. 

 

It is also crucial for the group to maintain a strong cash flow since interest rates are unlikely to soften any time soon, he said. 

 

Ang highlighted that Tiong Woon will continue focusing on its core capabilities to strengthen its competitive edge and provide &ldquo high quality&rdquo solutions to clients. &ldquo Customers want a partner that they can trust,&rdquo he said. 

 

The group&rsquo s positioning as a &ldquo prominent one-stop integrated heavy-lift specialist and service provider&rdquo also means that it is well-placed to benefit from strong demand in the coming years, both in Singapore and abroad, he added.