BT 16/4/2012 : Myanmar's where the action is for Sin Heng

 Publish date: Mon, 16 Apr 2012, 12:42 PM

Published April 16, 2012
Myanmar's where the action is for Sin Heng
Crane specialist sees big business there as nation starts building up its infrastructure

Ven Sreenivasan
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Huge in tonnage: MD Don Tan Cheng Soon (second from left) sees 'a very busy year ahead' for Sin Heng. Others in the management team are his brothers Cheng Kwong (left) and Cheng Guan (right), and their father and company founder Tan Ah Lye

LISTED crane specialist Sin Heng Heavy Machinery Ltd expects its new Myanmar venture to deliver the quantum leap it has been seeking since listing some two years ago.

"Myanmar is some 20 years behind the rest of South-east Asia in infrastructure development," CEO Don Tan Cheng Soon told BT. "There is huge pent-up demand for bridges, roads, buildings, ports and power plants. And this means big demand for heavy machinery."

The kind of heavy machinery Sin Heng specialises in.

The company - which is a leader in the rental and trading of cranes and lifting platforms - last month established a 50:50 joint venture with Starhigh Asia Pacific, a vehicle controlled by Myanmar native and naturalised Singaporean Si Thu Phyo. The new company is already in advanced negotiations for several ports, power plant and oil & gas projects in Myanmar.

"Mr Si Thu is a businessman with a very strong business network in Myanmar, which he will use to full effect," Mr Tan said. "We will provide the equipment and technical expertise."

In short, the joint venture will secure projects in Myanmar which will require the lease and sale of Sin Heng's Singapore- based cranes and other heavy machinery.

All this comes amid unexpected political liberalisation in that country, culminating in the recent elections which saw opposition candidates led by Aung Sang Su Kyi returned to Parliament. Western nations reacted by swiftly lifting various debilitating sanctions, thus paving the way for rapid economic and social rehabilitation of the country.

But Sin Heng is no newcomer to the region. When most other Singapore businesses were looking towards China, the company decided its fortunes lay in this region.

Although Singapore still accounts for the lion's share of Sin Heng's turnover (about 54 per cent), it has also built up a strong and growing foothold in Vietnam, Malaysia and Indonesia. According to Mr Tan, margins from these countries have also tended to be better than in Singapore.

Crane rentals account for 31 per cent of revenue and 65 per cent of gross profit, while trading (the sale of reconditioned used cranes) accounts for 69 per cent of revenue and 35 per cent of gross profit.

"We have been refocusing on rentals, which provide better margins and stable recurrent revenue inflow," Mr Tan added. With 7 per cent, Sin Heng boasts one of the highest net margins in the business.

Although listed on the Singapore Exchange (SGX) only in February 2010, Sin Heng's history stretches back to 1969, when it was set up by Mr Tan's father, Tan Ah Lye (who remains the company's adviser). Today, the company is run by Mr Tan, his two brothers - Cheng Guan and Cheng Kwong - and a team of professional managers.

Sin Heng started out as a pioneer in early infrastructure projects, including Changi Airport and Jurong Island, and over the years moved on to numerous other projects like Marina Bay Sands, Resorts World Sentosa, Singapore Flyer, Kallang Expressway, the MRT system and others. It is still involved in the MRT Downtown Line.

For the six months to end-December 2011, Sin Heng turned in a 7 per cent rise in net profit to $4.2 million on a 39 per cent rise in its topline to $64 million. Mr Tan attributes the modest bottomline growth to regional investment outlays.

As at the end of last year, Sin Heng had 128 cranes worth $90 million carrying gross tonnage of 12,800 tonnes, largely comprising crawler cranes. It has another 181 aerial works (lifting) platforms worth some $8 million.

"We are not the biggest in terms of crane numbers, but we are certainly huge in terms of tonnage - which is what matters in this business," Mr Tan said.

The company focuses on the 50-250 tonne category, where Mr Tan says demand is strongest and steadiest. It also boasts one of the world's youngest fleet, averaging five years.

Such has been its growth that Sin Heng is now the biggest customer for Japanese heavy machinery maker Kobelco. It is also ranked among the top buyers for many European and Japanese equipment makers, including Japan's Kato.

Two years before its 2010 listing, the Tan family sold 80 per cent of their stake in the company to private equity group SEAVI Advent Pte Equity. Following the 2010 listing, SEAVI's stake was diluted to 38.8 per cent. The Tan family controls 23.4 per cent.

Recently, Sin Heng disclosed that SEAVI is planning to sell its stake. Why?

"Private equity players have a mandate defining how long they can stay invested after a company lists," explained Mr Tan.

He declined to comment on market speculation that a global Fortune 500 company is poised to buy SEAVI's Sin Heng stake.

Whatever the case, the new investor will be buying into a fast-growing regional infrastructure equipment firm that is aggressively expanding its footprint.

"We are looking at a very busy year ahead," Mr Tan said, as he scanned Sin Heng's big yard in Gul Road - almost the size of two football fields. "There is a lot of talk about business opportunities in Myanmar. For us, it is now more than just talk. There is huge demand for our equipment over there. This is a country whose telecoms network, for instance, still uses the outdated CDMA system."

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