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Tat Hong Growing to a Global Player

ozone2002
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15-Jan-2010 13:18

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Motorists travel over the bridge against the view of Singapore skyline.

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S'pore construction demand for 2010 expected to reach S$21b-$27b

SINGAPORE: Singapore's construction sector demand is expected to reach between S$21 and S$27 billion for this year.

The public sector is likely to be the main driver, contributing about two-thirds of the demand from civil engineering construction and subway-related projects.

Singapore's construction sector has seen demand slide since the boom times of 2008.

But the Building and Construction Authority (BCA) estimates that 2010 will be a better year.

With strong demand from public sector projects like MRT lines and civil engineering works, total demand for the construction sector is forecast to go as high as S$27 billion this year.

Senior Minister of State for National Development Grace Fu said: "Public sector works will include large infrastructure projects such as the Downtown Line Stage 3 and various major road works.

"In addition, the industry can look forward to more tendering opportunities in building projects. This will include the construction of new HDB flats to meet the ongoing demand for public housing."

The public sector is expected to contribute 65 per cent of construction demand this year.

Private sector construction demand is expected to be slightly more upbeat than last year, amounting to between S$7 billion and S$9.1 billion.

Private residential projects are also projected to increase gradually in tandem with the improved market sentiment. But analysts said as demand rises, there will be other risks.

Song Seng Wun, regional economist, CIMB-GK Research, said: "Basically, both the private sector and to some extent, the stimulus effects will still be adding on to the demand picture.

"So one of the bigger risks, other than material costs, would be labour costs for the coming couple of years if we see growth strengthen globally."

The BCA's three-year forecast also suggested that demand would slowly fall to between S$18 billion and S$25 billion until the end of 2012. This is because government stimulus is likely to slow down and the private sector begins to bear more weight on its own. - CNA/vm

ozone2002 ( Date: 15-Jan-2010 13:17) Posted:

S'pore govt is spending on construction ..heard $12bil

companies that will benefit are those supplying cranes,civil engr, foundation groundwork etc.. services

essential for construction..

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ozone2002
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15-Jan-2010 13:17

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S'pore govt is spending on construction ..heard $12bil

companies that will benefit are those supplying cranes,civil engr, foundation groundwork etc.. services

essential for construction..

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oceanblue
Senior

15-Jan-2010 11:28

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Looking interesting with share buybacks in the last few days.

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derekchong
Veteran

08-Jan-2010 10:48

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what happen. such a huge queue vol. to sell.

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derekchong
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04-Jan-2010 15:32

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cross $1.060 aredi, going to move higher liao.

cheers.

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Bintang
Elite

17-Dec-2009 07:00

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Tat Hong did not cross $1.06 which is at the 100MA , after touching this resistance , it came down to $1.02 immediately . It is loosing its momemtum again , increasing volume done in the next few days may push the price going down to the next downside support .

Bintang ( Date: 15-Dec-2009 20:33) Posted:

Tat Hong although went up to $ 1.06 today touching the 100MA , the indecision candle stick formed today reflected the price movement in the near term . If the price has to come down , the stronger support must be at 97 cents

Bintang ( Date: 14-Dec-2009 16:36) Posted:

After hitting the short term low at 95 cents , Tat Hong made a technical rebounce today . It is now going up to touch $1.05 , n this is also filling a gap at $1.04 which created on 30/10/09 . It may at most go further up to $1.06 which touches the 100MA .

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Bintang
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15-Dec-2009 20:33

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Bintang ( Date: 14-Dec-2009 16:36) Posted:

derekchong ( Date: 14-Dec-2009 16:03) Posted:

Tat Hong is moving up on expecting good result.

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derekchong
Veteran

14-Dec-2009 19:25

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tomorrow px likely above $1.08 beco many directors accepted the option granted

to them at $1.08 ( in sgx co. news)

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Bintang
Elite

14-Dec-2009 19:11

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Yes , that is the 100 days simple moving average . This is the medium term moving average that may provide resistance to the share price when it goes above the share price . To beat this MA , must soar with huge volume to form key reversal . But not in the case of Tat Hong now .

everstrong ( Date: 14-Dec-2009 18:47) Posted:

Bintang, can u enlighten us on what u mean by 100MA? Which reference website can I access for guidance? MA stands for Moving Average?

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everstrong
Member

14-Dec-2009 18:47

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Bintang, can u enlighten us on what u mean by 100MA? Which reference website can I access for guidance? MA stands for Moving Average?

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Bintang
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14-Dec-2009 16:36

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derekchong ( Date: 14-Dec-2009 16:03) Posted:

Tat Hong is moving up on expecting good result.

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derekchong
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14-Dec-2009 16:03

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Tat Hong is moving up on expecting good result.

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Bintang
Elite

14-Nov-2009 10:40

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Tat Hong is on its way down to 99 cents since its share price first broke the 55MA at $1.09 . After trying very hard later to bounce back to the same level but failed to overcome this obstacle . It came down very fast again with gapping down at $1.04 . Now it not only stays below the 10MA , but also breaks the neckline at 99.5 cents of the H&S pattern . To fail this pattern n reverse the down trend , Tat Hong must regain its momemtum by moving up very fast to $1.06 with huge volume . Otherwise , it may technically go down to 92 cents at 200MA before covering the downside gap at 66.5 cents .

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yipyip
Master

12-Oct-2009 20:58

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TA for 12Oct09 closed $1.03 : Tat Hong

EMA15: $1.040 (17Sep09 breakdown EMA25, 02Oct09 breakdown EMA50)

EMA25: $1.054 (06Oct09 breakdown EMA50)

EMA50: $1.060

Stochastic %K: 69.231

Williams'%R: -53.333

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musicwhiz5
Senior

12-Oct-2009 00:54

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Good comments posted by a forumer (cif5000) from another forum which I thought I'd share with everyone:-

1. Tat Hong has a stretched balance sheet. i.e. debt is too much to take on more debt.
2. AIF doesn't look like to have a long term interest in Tat Hong for now. Their main objective is to secure their $65m with a reasonable rate of return. The preference shares issue is structured that way.
3. Using China's growth story to reduce their outsize inventory pressure? I think so. To "Become the leading and dominant tower crane rental group in China through M&A & organic growth" I think not. For dominance, they have to soak up the supply and their capital is simply too little for that. Furthermore, the supply will grow to match the take up (if they are silly enough to do that). And not to forget the competition. e.g. http://www.cmaxmachinery.com/cat/list/037001
4. Lastly, a rental company is limited by the asset base. A conservative investor will value the business using the balance sheet.

My replies are as follow:-

1) True, which is why they did not leverage further. With gearing at 0.52, it would have been a stretch to take up more debt to do M&A.

2) AIF's aim as an investor is to secure a good return, I do not dispute that. But who's to say that Tat Hong also cannot benefit from the synergistic pertnership? There have cases where a strategic investor takes a stake in a company and shares its expertise and knowledge to further the business. Call it symbiotic and a win-win situation if you will - that's how the business world should work. If by the end of 5 years Tat Hong does not reap much benefit frmo AIF's entrance then I can conclude it was a crappy decision in the first place to take their S$65M. In the meantime, the jury is out on this.

3) Not really sure what you mean by this point. Most of their inventory in Singapore and Aussie consists of crawler cranes and heavy equipment, so even if there was excess capacity (and yes there is due to the economic downturn), there would be no way to channel this capacity to China as their business there is involved with tower cranes. Though you rightly pointed out that there is intense competition, Tat Hong's business model consists of buying over smaller players and taking control, thus building up their asset base. They can never become a market leader in the strict sense of the words, due to the fragmented nature of the industry, but they can become a somewhat more significant player than they are now by expanding their fleet to 1,000 tower cranes in 2-3 years time.

4) Of course their rental capacity is limited by their fleet size - if not what else would it be based on? I guess what you say saying is that one should disregard earning power of that rental inventory and just value Tat Hong on its Net Asset Value (NAV)? That would be the most conservative way of doing so, I agree. But don't you think their rental base acts as a cushion against falling equipment sales and thus should be factored into the value of the company as well? Of course, the exact value of it is very subjective, but I would not be too quick to dismiss it.

Any other further comments/views are most appreciated. Let us all continue to learn and enrich ourselves.

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jeremyow
Senior

12-Oct-2009 00:20

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Yep.....as investors we have to select companies with good management that are capable with integrity. I find this is paramount as only any honest and wise management will endure through tough and good times. This kind of management is interested in working hard to grow their business as they own their company with strong vision, not just to make money only but they really like to manage their business well with an intrinsic strong ownership of their business. So, an honest and wise management will do all they can to grow their business value wisely and also take good care of their shareholders' interests. Such management may not always be in the limelight and their business may go unnoticed as the business intrinsic value steadily grows through honest, capable and prudent management.

musicwhiz5 ( Date: 11-Oct-2009 11:50) Posted:

Yep Jeremyow, the future is never certain, which is why I place importance on quality of Management and their experience in managing the business. I also tend to look out for signs to see if the Management are shareholder-friendly, and this includes observing insider purchases and share buy-backs. Dividends are another aspect I look at, though it can be argued that retaining profits and cash can help the company to grow at a higher IRR than it otherwise would, assuming Management can allocate capital rationally.

Tat Hong's future at this point in time also contains elements of uncertainty - as expansion plans always face hiccups and obstacles, so must an investor prepare himself mentally for these. It is much better to be a realist than an optimist or pessimist, because business conditions necessitate taking a practical perspective on one's part-ownership in a business; and to implicitly trust in the people (i.e. Management and BOD) who are running the show. China is a market which is very fragmented, and made up of many smaller crane players which offer to sell or rent their cranes for projects supported by China's billion-dollar stimulus plan. Tat Hong's strategy has been to pump in capital and maintain control over these subsidiaries, by making strategic decisions and using their experience and expertise to grow these companies into more powerful players. The consolidation of resources will allow Tat Hong to slowly but surely grow in size, and emerge as a more dominant player in years to come. One must note that this is a slow and steady process and AIF's assistance would be invaluable to Tat Hong, which is the impetus for their co-operative deal in the first place.

While 2Q 2010 results may still be weak due to the lingering impact of the financial crisis, Management has already publicly indicated that "the worst is behind us" and 2H 2010 results are slated to improve. Of course, FY 2010 earnings will not even be as good as FY 2009, to be sure, but the fact is that rental income helps to form a cushion so that earnings do not fall further and for Tat Hong to fall into a net loss. It would be more important to examine aspects of the business such as Balance Sheet strength (gearing), Cash Flow effects and the status of their planned tower crane expansion. I look forward to analyzing their 1H FY 2010 results some time in mid-Nov 2009.

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yipyip
Master

11-Oct-2009 19:42

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Ratios For Tat Hong Holdings Limitd

Market Capitalisation:
Market Cap ($ Millions): 519.81
Shares (Millions): 504.67

Per Share Data ($SGD):
Earnings: 0.10
Sales: 1.25
Book Value: 0.81
Cash Flow: --
Cash: 0.09

Valuation Ratios:
Price/Earnings 10.36
Price/Sales 0.82
Price/Book 1.34
Price/Cash Flow 4.34

Management Effectiveness (%):
Return on Equity - ROE: 18.08
Return on Assets - ROA: 8.88
Return on Investment - ROI: 15.17

Profitability Ratios (%):
Gross Margin: 38.89
Operating Margin: 13.18
Net Profit Margin: 10.16

reuters.com 11 Oct 2009

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musicwhiz5
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11-Oct-2009 11:50

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jeremyow
Senior

11-Oct-2009 00:02

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Totally agree with you. ROE is one of the most important parameter to measure the performance of a company. A company that can maintain a high ROE, steadily growing earnings and book value, and is not excessively geared for its industry over a long period of time is worth investigating as an investment candidate. Sometimes, our assessment of a company may not be just limited to quantifiable figures and financial ratios based on their financial statements. We may need to also assess a company qualitatively to forecast whether they can continue to grow their businesses at exceptional rate. So, investing is both science and art. There maybe no right and wrong answer regarding a company's potential. An individual investor's opinion may be different from another individual on the prospects of the same company. Even different analysts may not share the same analysis about the same company's future performance. So, investing is a very dynamic process whereby there are so many factors and measurements that can be considered when assessing a company. This is why investing is never a simple process. However, it is also because being a dynamic process makes investing both challenging and interesting.

musicwhiz5 ( Date: 07-Oct-2009 11:57) Posted:

Actually, a more rigorous approach to reviewing the performance of a company is ROE, rather than EPS. Of course, one must note that ROE also can be distorted through the use of leverage, so one must adjust for that.

I feel that what's important with AIF and Tat Hong is the synergies which they can achieve which go far beyond what the Balance Sheet can currently quantify. There is a lot of business relationships, network, Guanxi and contacts which can be shared, and analysts are loathe to put a value to this because it is an intangible aspect of the business. Truth is, with AIF's experience and their status as a pro-Asian Private Equity Fund, this will help to extend Tat Hong's footprint in S.E.A, in the long-term.

I would caution not to expect miracles or immediate results from this partnership. It will probably only bear more fruit in 2-3 years time as Tat Hong grows its China footprint. One must be patient to witness the growth of a business. Rome was not built in a day.

Also, by reviewing the terms of the RCPS, it will become extremely onerous for Tat Hong after the 5th year. This demonstrates that they have the confidence for the business to do well enough in 5 years time, so that a substantial portion (if not all) of the RCPS will be converted mandatorily to ordinary shares. Thus the dilution to EPS is delayed, though the dilution to dividend will be immediate. But I see it as cash inflow now to build a business, increase ROE and cash flows, strengthen Balance Sheet, then return the favour back to AIF and minority shareholders.

Just my 2-cents views.

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Livermore
Master

10-Oct-2009 09:44

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This stock is worth much more than $1.15 in the future

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