Tiong Woon Corp

(26-08-2013, 08:10 PM)ET Semb Wrote: Hi dydx,

Are you able to elaborate a bit on the loan part? Can see that short term borrowing increase by about 14m however in cash flow repayment is more than proceeds from banks.

Can't help you here as I have not tried to dissect the Cash-Flow Statement. However, what is quite clear is that based on the latest Group B/S, Tiong Woon's gross total debts at $102.0m (+15.4% YoY) and net total debts at $75.8m (+15.6% YoY), when compared with the total equity at $240.6m, reflect a very comfortable gearing position - with Total Gross Debt/Equity Ratio at 42.4% and Net Debt/Equity Ratio at 31.5%. I suppose if Tiong Woon wants to lower its debts or gearing, the management can simply sell a few big cranes.

(26-08-2013, 08:51 PM)dydx Wrote:

(26-08-2013, 08:10 PM)ET Semb Wrote: Hi dydx,

Are you able to elaborate a bit on the loan part? Can see that short term borrowing increase by about 14m however in cash flow repayment is more than proceeds from banks.

Can't help you here as I have not tried to dissect the Cash-Flow Statement. However, what is quite clear is that based on the latest Group B/S, Tiong Woon's gross total debts at $102.0m (+15.4% YoY) and net total debts at $75.8m (+15.6% YoY), when compared with the total equity at $240.6m, reflect a very comfortable gearing position - with Total Gross Debt/Equity Ratio at 42.4% and Net Debt/Equity Ratio at 31.5%. I suppose if Tiong Woon wants to lower its debts or gearing, the management can simply sell a few big cranes.

In terms of ratio, it is indeed healthy.
Been trying to understand their debt for the past 3 years but the debt is like never ending regardless of how much they repay. Its just quite bothering since unable to interpret it for the last 3 yrs. its not as straightforward as its peers.

(26-08-2013, 09:54 PM)ET Semb Wrote: In terms of ratio, it is indeed healthy.
Been trying to understand their debt for the past 3 years but the debt is like never ending regardless of how much they repay. Its just quite bothering since unable to interpret it for the last 3 yrs. its not as straightforward as its peers.

As Tiong Woon has been expanding its cranes fleet - especially adding bigger-tonnage cranes which are required for heavy lift projects - therefore it is conceivable that the group will take up new term loans every year to part-finance the new cranes purchased, as the group continues to apply its healthy operating cash-flow to retire existing and older term loans taken up to part-finance cranes purchased in previous years. I don't see a major problem or risk here, so long as Tiong Woon does not add new cranes and financed them in an aggressive manner, and is able to deploy its cranes fleet to work on good and profitable projects.

BTW, I think it is relevant to note that based on its latest 30Jun13 B/S.....
http://infopub.sgx.com/FileOpen/1QFY2014...eID=251947
, Tat Hong had a much higher gross total debts balance of $500.4m and a net debts balance of $442.3m; when compared against its total equity of $728.0m, Tat Hong's Total Gross Debt/Equity Ratio at 68.7% and Net Debt/Equity Ratio at 60.8% are substantially higher than Tiong Woon's. Just on this score alone, I am much happier to be a Tiong Woon shareholder!

FY13 (ended 30Jun13) AR is out and makes interesting reading.....
http://infopub.sgx.com/FileOpen/Tiong%20...leID=19433

Having posted a convincing profit turnaround in FY13, it appears Tiong Woon is poised to do even better this FY14. It is relevant to note that Tiong Woon's PBT in FY14 will be boosted by an approx. $2.7m gain from the sale of its entire interest in its wholly-owned subsidiary Tiong Woon Oil & Gas Services Pte Ltd (“TWOG”) for $18.0m in cash - which will also strengthened the B/S - which was completed on 7Oct13.......
http://infopub.sgx.com/FileOpen/TWCH_Fin...eID=233042 [20Mar13 announcement]
http://infopub.sgx.com/FileOpen/TWCH_SPA...eID=240850 [5Jun13 announcement]
http://infopub.sgx.com/FileOpen/TWCH_Com...eID=258840 [7Oct13 announcement]

The 2Q result released last evening makes interesting reading…..
http://infopub.sgx.com/FileOpen/TWCH_2QR...eID=274277 [2Q result announcement]
http://infopub.sgx.com/FileOpen/TWCH_Pre...eID=274281 [press release]

The completion of the sale of 2 subsidiaries holding Bintan-based assets related to the previously loss-making Engineering Division has brought in $11.3m in cash sale proceeds, and has caused an one-off incremental PBT of $3.159m in 2Q. Going forward, the now down-sized Engineering Division - which recorded a small PBT of $338k in 2Q - should no longer be a major loss-making concern.

Tiong Woon's core and well-established Heavy Lift & Haulage Division has continued to bring in steady revenues (from providing mainly heavy lift & haulage solutions/services in Singapore and the regional markets) and respectable operating profits, as well as a solid stream of FCF (including from accounting depreciation of its huge fleet of cranes and other equipment, amounting to some $28.0m a year). On top of that, as a clear indication that the BV of its huge fleet of cranes and other heavy equipment is conservatively recorded, Tiong Woon has continued to book healthy other gains - $988k in 2Q and $2.819m in 1H - from sale of its older cranes and equipment, as the group continues to selectively upgrade and enlarge its operating equipment fleet.

Tiong Woon's latest (31Dec13) remained conservatively geared with sufficient financial flexibility to grow its business organically or through selective small-to-medium acquisitions.

With the latest (31Dec13) NAV/share at $0.5419, Tiong Woon at the last done share price of $0.325 appears grossly underpriced.

(13-02-2014, 12:39 PM)dydx Wrote: The 2Q result released last evening makes interesting reading…..
http://infopub.sgx.com/FileOpen/TWCH_2QR...eID=274277 [2Q result announcement]
http://infopub.sgx.com/FileOpen/TWCH_Pre...eID=274281 [press release]

The completion of the sale of 2 subsidiaries holding Bintan-based assets related to the previously loss-making Engineering Division has brought in $11.3m in cash sale proceeds, and has caused an one-off incremental PBT of $3.159m in 2Q. Going forward, the now down-sized Engineering Division - which recorded a small PBT of $338k in 2Q - should no longer be a major loss-making concern.

Tiong Woon's core and well-established Heavy Lift & Haulage Division has continued to bring in steady revenues (from providing mainly heavy lift & haulage solutions/services in Singapore and the regional markets) and respectable operating profits, as well as a solid stream of FCF (including from accounting depreciation of its huge fleet of cranes and other equipment, amounting to some $28.0m a year). On top of that, as a clear indication that the BV of its huge fleet of cranes and other heavy equipment is conservatively recorded, Tiong Woon has continued to book healthy other gains - $988k in 2Q and $2.819m in 1H - from sale of its older cranes and equipment, as the group continues to selectively upgrade and enlarge its operating equipment fleet.

Tiong Woon's latest (31Dec13) remained conservatively geared with sufficient financial flexibility to grow its business organically or through selective small-to-medium acquisitions.

With the latest (31Dec13) NAV/share at $0.5419, Tiong Woon at the last done share price of $0.325 appears grossly underpriced.

Hi,

When looking at fcf for Tiong Woon, one must note the heavy use of finance leases in place of capex which is not shown on the cashflow statements. This is why despite the cash flow statements showing net repayment of loans, the borrowings seem to increase.

(13-02-2014, 03:24 PM)Clement Wrote: When looking at fcf for Tiong Woon, one must note the heavy use of finance leases in place of capex which is not shown on the cashflow statements. This is why despite the cash flow statements showing net repayment of loans, the borrowings seem to increase.

Do you mean operating leases instead, as my understanding is that in accordance with current local accounting standards/practices, finance leases have to be captured as part of usual on-balance sheet borrowings.

If you refer to Note 1(b)(ii) entitled "Aggregate amount of group's borrowings and debt securities" and the accompanying Sub-Note entitled "Details of any collateral" in p4 of the latest 2Q result announcement…..
http://infopub.sgx.com/FileOpen/TWCH_2QR...eID=274277 [2Q result announcement]
, you will notice that all of Tiong Woon's borrowings repayable after 1 year ($58.273m), and a major portion ($27.909m) of the borrowings repayable in 1 year or lees, or on demand, comprised secured borrowings related to hire purchases and term loans which are collaterised against certain PPE (property, plant, and equipment). So quite clearly, Tiong Woon does not finance its purchases of new equipment or its existing fleet of equipment by way of finance leases. You will also notice that total borrowings balance stood at $98.215m as at 31Dec13, which is slightly lower than the total balance of $101.956m as at 30Jun13. This is despite Tiong Woon having invested $11.861m in new PPE in 1H (1Q and 2Q), and another $3.762m in a new subsidiary in 1Q, as shown in the Cash-flow Statement in p5.

The Cash-flow Statement in p5 also showed that Tiong Woon did not take on any new borrowings in 3Q. Instead, the group had applied the whole of the $11.3m sales proceeds from the disposal of 2 subsidiaries, and a portion of its net cash generated from operating activities ($11.545m), to retire/prepay a total of $19.148m in borrowings, including $5.358m in hire purchases (reflected as "finance lease liabilities").

I tend to believe that Tiong Woon is properly and conservatively financed.

(13-02-2014, 07:34 PM)dydx Wrote:

(13-02-2014, 03:24 PM)Clement Wrote: When looking at fcf for Tiong Woon, one must note the heavy use of finance leases in place of capex which is not shown on the cashflow statements. This is why despite the cash flow statements showing net repayment of loans, the borrowings seem to increase.

Do you mean operating leases instead, as my understanding is that in accordance with current local accounting standards/practices, finance leases have to be captured as part of usual on-balance sheet borrowings.

If you refer to Note 1(b)(ii) entitled "Aggregate amount of group's borrowings and debt securities" and the accompanying Sub-Note entitled "Details of any collateral" in p4 of the latest 2Q result announcement…..
http://infopub.sgx.com/FileOpen/TWCH_2QR...eID=274277 [2Q result announcement]
, you will notice that all of Tiong Woon's borrowings repayable after 1 year ($58.273m), and a major portion ($27.909m) of the borrowings repayable in 1 year or lees, or on demand, comprised secured borrowings related to hire purchases and term loans which are collaterised against certain PPE (property, plant, and equipment). So quite clearly, Tiong Woon does not finance its purchases of new equipment or its existing fleet of equipment by way of finance leases. You will also notice that total borrowings balance stood at $98.215m as at 31Dec13, which is slightly lower than the total balance of $101.956m as at 30Jun13. This is despite Tiong Woon having invested $11.861m in new PPE in 1H (1Q and 2Q), and another $3.762m in a new subsidiary in 1Q, as shown in the Cash-flow Statement in p5.

The Cash-flow Statement in p5 also showed that Tiong Woon did not take on any new borrowings in 3Q. Instead, the group had applied the whole of the $11.3m sales proceeds from the disposal of 2 subsidiaries, and a portion of its net cash generated from operating activities ($11.545m), to retire/prepay a total of $19.148m in borrowings, including $5.358m in hire purchases (reflected as "finance lease liabilities").

I tend to believe that Tiong Woon is properly and conservatively financed.

Hi,

I think the last full year figures better illustrate what i am getting at.

From the 2013 annual report, we find that net PPE increased by 17m for the year despite.
1) depreciation of 29m for the year
2)disposals of PPE amounting to 9m in book value. (Proceeds of 13.6m less gain of 4.5m.)
3) Reclassification to PPE held for sale in current assets of 10m in book value. (Note to PPE)

For this to happen, the company must have spent 65m on PPE.

From note 22 in the AR, the company had 65m in additions in 2013, of which only 14m was disclosed as capex in the cash flow statements. To find the remaining, we can look at the increase in borrowings from 88m to 102m despite a net repayment of 35m reported in the CFS.

Now based on this, the traditional FCF (Cash flow from operations - working capital investments - net capex from cash flow statements) will over estimate actual free cash flow as net capex is under estimated.

Tiong Woon almost certainly did use hire purchases in 1h14 to finance new Ppe. Net increase in Ppe was 8.6m after depreciation of 14.3m and disposal of Ppe with nbv of 3m. Assuming none of the changes were due to the subsidiary disposal, that means additions was around 26m and not 11.8m as on the cfs. Similarly, the company reported net debt repayment of 21m and yet borrowings decreased by only 4m.

Using 20.2m for net capex and 1h14 figures, a very basic approximation yields fcff of -6.7m not including the disposal proceeds from the subsidiary or the additional investment in a subsidiary.

"There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested — there's never any cash. It reminds me of the guy who looks at all of his equipment and says, "There's all of my profit." We hate that kind of business." - Charlie Munger at the 2003 Berkshire Hathaway Shareholder Meeting

At the last done share price of $0.30, and based on the improved 1H (ended 31Dec13) results which posted a strong profit rebound and a higher NAV/share of $0.5419…..
http://infopub.sgx.com/FileOpen/TWCH_2QR...eID=274277
, it appears that Tiong Woon is getting to be a pretty good value investing opportunity, bearing in mind there should be the usual year-end dividend (last FY12: $0.004/share) coming, and the NAV/share should go even higher in the next few reporting periods.

eversince 1H results reported, Tiong Woon has been on a gradual downtrend. Mr market seems to think TW is overpriced for now.