Tiong Woon Corp

[setan]

Hi dydx,

For Tiong Woon, it seems that the largest contributor to it's revenue is the Heavy Lift and Haulage segment. However, I noticed that the profit margin is fluctuating up & down in the past few years. Do you know the reason?

For Q1 & Q2 profit margin for this segment is hovering at about 10%+ while in FY2012, it was less than 10%.

Thanks in advance.

setan

[dydx]

setan,
I think we should bear in mind that Tiong Woon's specialty in providing Heavy Lift and Haulage service to major oil & gas, petrochemicals plant construction projects is subjected to the usual risks and opportunities inherent in the engineering/construction industry, including cyclicality especially in the investment cycle within the oil & gas refineries and petrochemicals plants sector, and fluctuating profit margins due to supply/demand mismatches during different periods of the market/industry evolution.

Many major oil & gas, petrochemicals plant construction projects were mothballed or delayed during and after the 2008/9 global financial and banking crisis. As a result, demand for Tiong Woon's cranes and services fell and there was an over-supply situation that lasted till 2011/2. From Tiong Woon's improving financial performance since 1H/FY13.....
http://info.sgx.com/webcoranncatth.nsf/V...A0030CFCC/$file/TWCL_2QResultsFY2013.pdf?openelement
, we now have evidence that both demand and margins supporting the core Heavy Lift and Haulage business have recovered. There are even signs that demand and margins are trending upwards further, as indicated by the rather strong QOQ increase in 2Q's Revenue and GP. I thought the 2Q's GP Margin at 29.2% (vs. 23.8% in 1H/FY12), and PBT Margin at 11.2% (vs. 2.8% in 1H/FY12), are already not bad!

[pianist]

What does qoq means? Quarter2 against quarter1 or quarter2 2013 against quarter2 2012?

[dydx]

QOQ measure: calculates the change between one financial quarter and the previous financial quarter. In the case of Tiong Woon, I am referring to the change between 2Q/FY13 and (or vs.) 1Q/FY13.

[dydx]

The just released 3Q results indicate another steady and slightly improving quarter.....
http://info.sgx.com/webcoranncatth.nsf/V...5002E8072/$file/TWCH_3QResultsFY2013.pdf?openelement [result announcement]
http://info.sgx.com/webcoranncatth.nsf/V...5002EF40B/$file/TWCH_PressRelease3QFY2013.pdf?openelement [press release]

I thought the following are worth noting:
1. Tiong Woon has been booking decent realised net gain on disposal of PPE (presumably cranes) in the last 3 quarters. I suppose we can reasonably assume that market prices for used cranes and related equipment have improved, and where good market opportunities arise and where necessary, Tiong Woon - now with a fleet of 407 cranes in lifting assets, and 216 vehicles and equipment in haulage assets - can choose to dispose of more used PPEs and book more gains, which will raise PBT.
2. The core Heavy Lift and Haulage division continues to post YOY increases in Revenue and PBT, and generating solid FCF, even after accounting for capex in the 1st 3 quarters which has trailed disposal of PPE. This indicates Tiong Woon's management are quite smart and conservative in investing in new PPEs.
3. 31Mar13 NAV/share has risen to $0.5011. This is likely conservative under a scenario of rising market prices of used cranes and other equipment.
4. Based on an EPS of $0.0281 achieved in the first 3 quarters, full-year FY13 (ending 30Jun13) EPS could well hit $0.04.

[ngcheeki]

L&T report on Tiong Woon this morning!!

TIONG WOON
Stock Update S$0.405-TWC SP
We are lowering our recommendation on Tiong Woon
from Buy to Hold as
 3Q ended Mar ’13 profit of $3.9mln was below
expectations due to lower than expected sales,
resulting in a downward revision of our operating full
year ending June ’13 profit forecast from $22mln
previously to $18mln;
 3Q ended Mar ’13 profit of $3.9mln benefitted from a
forex gain of $1.36mln and $642,000 gain on disposal
of property, implying that core profit was only
$1.9mln, way below a quarter ago’s $5mln;
 notwithstanding this, we believe it was still a
commendable set of result considering that it was
during the seasonally slowest period of the year and
year ago’s loss of $373,000;
 the next quarter will benefit from the absence of losses
from their Batam yard pending the completion of the
sale of the loss making yard and also exceptional gain
of around $4-5mln from the yard sale;
 even with the lower $18mln forecast, its 10.4x PE is
still at a discount to Sin Heng and Tat Hong’s 11-
12x.

[dydx]

Today's (5Jun13) announcement.....
http://info.sgx.com/webcoranncatth.nsf/V...10041C707/$file/TWCH_SPA_5June2013.pdf?openelement
basically confirmed Tiong Woon Corp having entered into a binding agreement on the disposal of its loss-making wholly-owned subsidiary Tiong Woon Oil & Gas Services Pte Ltd (“TWOG”) (including its subsidiary PT Bintan) based on the following key terms -

(1) Upon completion of the disposal expected between the 2nd-half of Jul13 and the 1st-half of Aug13, Tiong Woon Corp/Group will receive a total sum $18.0m in cash.
(2) Tiong Woon Corp/Group stands to book a gain from the disposal of approximately $2.7m after adjustments for foreign currency translation.
(3) Upon the disposal, Tiong Woon Corp will still retain all rights over a piece of industrial land of approx. 16 hectares in Bintan, which will subsequently be transferred to the wholly-owned subsidiary, PT. TWC Indonesia.

This means from FY14 (starting 1Jul13) onwards, Tiong Woon will no longer be saddled with further losses from TWOG, which amounted to $4.68m in the 1st 3Qs in FY13 (ending 30Jun13). 1Q-FY14's P&L will be boosted by the projected gain of approx. $2.7m from the disposal; and the $18.0m proceeds from the disposal will cut Tiong Woon Group's total bank borrowings and gearing, and strengthen its B/S.

Indeed, this is a very positive development.

[thec00l]

a report release from L&T today.

We are upgrading our recommendation on Tiong
Woon Corp (TWC) to BUY as
 unlike Tat Hong, we expect a strong finish for 4Q
ended June’13, thereby meeting the street’s
expectation for about $5mln profit, up from a loss
of $5mln last year and profit of $3.9mln a quarter
ago, reflecting the strong recovery of the oil, gas
and petrochemical markets in Singapore (49% of
sales), Middles East (16%) and Malaysia (10%);
 this would bring full year to June’13 profit up to
about $18mln, a strong turnaround from last year’s
first ever loss of $5.8mln;
 unlike Tat Hong whose key markets in Australia
(50% of sales) and Indonesia (20%) are suffering
from the slowdown of the mining and commodity
markets, TWC’s key customers such as Rotary
Engineering has secured close to $700mln worth
of new contracts in Singapore this year alone
(bringing its order books to a record $1.1bln), which
is up significantly from last year’s $50mln on the
back of robust oil and petrochemical demand in
South East Asia;
 TWC’s other key oil and petrochemical customers
such as Shell, Sinopec and Total are in the midst
of setting up a first ever joint venture to build and
expand a new storage facility at Singapore Lube Park
in Tuas which is expected to cost close to $1bln by
2015;
 We understand from Rotary Engineering that TWC
is a key supplier of cranes for their projects both in
Singapore as well as Middle East and due to their
robust order books of $1.1bln, TWC does not have
enough capacity to meet their strong demand and
they have to rent cranes from smaller companies
such as Sin Heng and Hiap Tong, but not so much
Tat Hong;
 Sin Heng and Hiap Tong had been quoted in
interviews with The Edge that rental rates for their
cranes have risen about 50-60% in the past 2 years,
which is about in line with TWC’s own estimation,
underpinned by the strong oil and gas and
petrochemical sectors;
 TWC is in the midst of increasing their capacity by
another 20-25% over the next 2 years to meet the
strong demand;
 TWC will also be benefitting from the Singapore
government’s plan to expand more MRT lines in
Singapore, build 20-25K new HDB flats per year
over the next few years as well as the infrastructure
needed to accommodate close to 7mln people by
2025;
 TWC will also benefit from the absence of losses
(suffered losses of close to $4mln a year in the past
3 years) from the sale of their fabrication yard in
Bintan to Metech Energy;
 Besides absence of operating losses after the sale,
TWC will boost their cash holdings significantly by
$18mln (versus current holdings of $20mln) as well
as register an exceptional gain of close to $3mln in
the new year ahead;
 Consensus is expecting TWC to grow 28% in the
year ahead to $23mln, translating to a forward PE
of 7x.
 This is undemanding against its own historical
average PE of 10x as well as Tat Hong’s 10x, Sin
Heng’s 10x and Hiap Tong’s 11x. TWC’s price to
book of 0.7x is also undemanding against the sector
average of 0.9x and this is despite its gross gearing
of 40% being only half that of the sector average of
80%.

[dydx]

FY13 (ended 30Jun13) full-year results just released this morning.....
http://infopub.sgx.com/FileOpen/TWCH_Ful...eID=253763 [results announcement]
http://infopub.sgx.com/FileOpen/TWCH_Pre...eID=253765 [press release]
There are quite clear signs that Tiong Woon's operating earnings have recovered back to a more normal state.

Why shouldn't Mr Market be willing to attach a higher share price, bearing in mind the latest NAV is already $0.5122/share?

[ET Semb]

FY13 (ended 30Jun13) full-year results just released this morning.....
http://infopub.sgx.com/FileOpen/TWCH_Ful...eID=253763 [results announcement]
http://infopub.sgx.com/FileOpen/TWCH_Pre...eID=253765 [press release]
There are quite clear signs that Tiong Woon's operating earnings have recovered back to a more normal state.

Why shouldn't Mr Market be willing to attach a higher share price, bearing in mind the latest NAV is already $0.5122/share?

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.