Tat Hong's FY17 results continued to portray a generally weak picture. Overall revenue declined 13% to S$458.3m due to weaker revenue contributions from the Crane Rental and Distribution divisions, partially offset by better contributions in the Tower Crane Rental and the General Equipment Rental divisions.

Gross profit margin was down from 30.2% to 27.8% mainly due to lower utilization rates under its Crane Rental division and lower rental rates as well as higher costs for Tower Crane Rental division to meet scheduled project completion.

A net loss of S$38.0m was recorded after deducting income taxes paid in China, the reversal of deferred tax assets related to Australia and minority interests’ share of profits related primarily to subsidiaries in China. On certain adjustments, operating loss was at S$28.9 million.

Looking ahead, management cited its healthy cash flows from operations and a much deleveraged balance sheet. They are also beginning to see initial results of its efforts to participate in China's one belt one road initiative. However, demand in several of its markets is still expected to be subdued.

Thus we maintain HOLD and S$0.40 fair value estimate.

Source: OCBC Research - 31 May 2017