Company update Sep 24 - Tiong Woon

A very common scenario in Singapore market. After a company has turn around, people start taking notice, more and more analyst would start cover the company. Today, here is the comment from CIMB-GK regarding Tiong Woon. In the short term, one more buy call would definitely support the share price. We are unlikely to see it goes back to 0.6x region. Hopefully I would be able to buy some at 0.7x or 0.8x.

I do hope there is a second wave of sub-prime problem which would trigger another correction. I believe after another round of correction is cleared, then the market would be prepared to go back. On the other hand, we hope some of the foreign money or china money would enter South East Asia market in coming months.

CIMB-GK:

Initiate with Outperform and target price of S$1.50, set at 15x CY08 P/E,
comparable to valuations for SGX-listed construction peers. Our target implies
upside potential of 43%. TWC trades at an attractive 10.7x CY08 P/E against a 3-
year core earnings CAGR forecast of 50.3%.

Tiong Woon FY07 result

Tiong Woon just released the full year result.

Highlight:

• Net profit $22.5m, up 155% from previous year

• Revenue up 44% to S$99.8 million

• Earnings per share: 6.67 cents, up 146%

• Net Asset Value per share: 32 cents, up 26%

• Return on Equity: 23% (FY2006: 12%)
  

* Increase of ROE signal better deployment of shareholder's fund

Facts:

• The company is currently ranked 11th largest crane owning company worldwide by International Cranes, a reputed trade magazine, in its IC50 2007 survey.

• Going forward, the Group plans to actively pursue business opportunities in construction, infrastructure, offshore marine, power plants, petrochemicals and oil and gas projects in markets such as China, Thailand, Malaysia, Indonesia, Vietnam and the Middle East.
  

• Earlier this year, TWC became the first Singapore company to be awarded investment licence to operate 100% foreign-owned entity in Saudi Arabia by Saudi Arabian General Investment Authority (SAGIA) Singapore.

• In November 2006, it acquired a 65-hectare fabrication yard in Bintan, Indonesia, with a view to supporting its current fleet of heavy lift equipment, tugs and barges, and in due course, growing a new income stream from fabrication and engineering projects.
  

Five-pronged business strategy:

• To remain focused on its core competency of heavy lift and haulage;
• To develop its fabrication and engineering competency for marine, oil & gas industry;
• To actively seek business opportunities in the emerging and growth markets;
• To invest in higher capacity and specialised equipment; and
• To forge alliances and co-operation with strategic and industry players.

From financial statement:

• Turnover increase 44%, while cost of sales only increased by 37%
• Cash generated from operation is 30,585 compare to 16,906 last year

My comment:

This is really a good result for share holder. In future, the construction boom in Singapore and offshore & marine cycle would keep driving the demand for crane and other engineering service. Looking to enter this counter at attractive price. If ever, the market downward swing is coming back, would enter at lower price.

Kim Eng recommendation (updated 29 Aug):

Along with our EPS upgrade, we are raising our target price to S$1.15 based on a PEG of 0.7x, which translates into FY08 PE of 16.3x – in tandem with our other Downstream O&G plays. Reiterate BUY.