Tat Hong Holdings Ltd. – Value Analysis (SINGAPORE:T03) : December 26, 2017

Capitalcube gives Tat Hong Holdings Ltd. a score of 31.

Our analysis is based on comparing Tat Hong Holdings Ltd. with the following peers – Tiong Woon Corporation Holding Ltd, Hiap Tong Corporation Ltd., First Ship Lease Trust Shipping Business Trust Units and Lian Beng Group Ltd (BQM-SG, 5PO-SG, D8DU-SG and L03-SG).

Investment Outlook

Tat Hong Holdings Ltd. has a fundamental score of 31 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Taking peer performance into consideration, relative performance over the last month and last year is around the peer median.
  • It currently trades at a Price/Book ratio of (0.56).
  • T03-SG‘s EBITDA-based price implies better than peer median growth.The market seems to expect a turnaround in the company’s current EBITDA-based return on equity.
  • T03-SG‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • T03-SG‘s return on assets has improved from below median to about median among its peers over the last five years.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • While T03-SG‘s revenues growth has been around the peer median in recent years, the market seems to see faster growth ahead and gives its shares a higher than peer median Price/EBITDA ratio.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • T03-SG seems too levered to raise additional debt.

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Leverage & Liquidity

T03-SG would seem to have a hard time raising additional debt.

  • With debt at a relatively high 61.06% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 70.04%), and relatively tight interest coverage level of -1.23x, T03-SG would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 4 peers for the company have an outstanding debt balance.

T03-SG has maintained its Limited Flexibility profile from the recent year-end.

  • T03-SG‘s interest coverage is similar to last year’s low of -1.30x, which compares to the 2013 high of 4.24x.
  • Though its interest coverage has remained relatively stable at -1.23x compared to 2017, its peer median has decreased to 1.74x from 2.47x during this period.
  • Interest coverage rose 0.79 points relative to peers.
  • T03-SG‘s debt-EV has declined 4.47 percentage points from last year’s high but remains above its five-year average debt-EV of 56.50.
  • The decrease in its debt-EV to 61.06% from 65.53% (in 2017) was also accompanied by a decrease in its peer median during this period to 70.04% from 74.97%.

Access the detailed analysis for Tat Hong Holdings Ltd.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Tiong Woon Corporation Holding Ltd 70.04 0.82 7.12 20.29
Hiap Tong Corporation Ltd. 56.13 0.79 0.26 27.97
First Ship Lease Trust Shipping Business Trust Units 88.51 0.15 1.74 28.83
Lian Beng Group Ltd 73.33 1.19 4.03 13.93
Tat Hong Holdings Ltd 61.06 1.12 -1.23 8.42
Peer Median 70.04 0.82 1.74 20.29
Best In Class 56.13 1.19 7.12 28.83

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Company Profile

Tat Hong Holdings Ltd. is an investment company, which engages in rental and sale of cranes, and heavy equipment. It operates through the following business segments: Crane Rental, Tower Crane Rental, General Equipment Rental and Distribution. The Crane Rental segment includes rental income of cranes. Tower Crane Rental segment includes rental income of tower cranes. The General Equipment Rental segment consists of rental income from other construction equipment. The Distribution segment covers the sales of cranes and other construction equipment, spare parts and provision of other ancillary services. The company was founded on October 25, 1991 and is headquartered in Singapore.

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