Tat Hong’s 1QFY16 results were within our expectations. Revenue dropped 15% YoY to S$139.3m and PATMI declined 53% to S$2.8m, constituting about 22% of our full year estimates. This set of weak results also included S$8.5m of one-off gains from the disposal of properties in Malaysia and Australia. Besides the impact of a depreciating AUD against SGD, continued weakness in core markets and the construction sector led to lower sales for all divisions (Crane Rental, Tower Crane Rental, General Equipment Rental and Distribution).

In particular, Tower Crane Rental, which was previously the only growing business segment in FY15, had seen a decline due to the completion of projects and lower utilisation rates. Nonetheless, management stated their expectations for steady growth in the latter segment, while they look to reduce the existing fleet size across the various divisions. Maintain HOLD, with fair value estimate of S$0.57.

Source: OCBC Research - 17 Aug 2015