TAT HONG HOLDINGS LTD
T03.SI
Tat Hong Holdings: Mixed outlook on China amid spin-off plans
Spin-off may take a few months
Mixed views on China
Outlook for other business units still weak
Spin-off of China business going through regulatory process
- With regards to the proposed listing of the Tower Crane Rental business in China on the Taiwan Stock Exchange, the latest update by Tat Hong was that the proposed listing is not considered a chain listing by SGX-ST.
- We note that this is still in preliminary stages and would typically take a few months to complete. The intention is to spinoff the said business via a listing of shares in Tat Hong Equipment Service Co (THES), which is a 92.7%-owned subsidiary of Tat Hong Equipment (China) Pte Ltd in which the company has 88.4% interest with the remaining 11.6% interest owned by Yongmao Holdings Limited. Thereafter, the group’s holding in the business is expected to reduce by about 20% or more.
TWSE has attracted eight foreign companies for listing so far
- Including THES, about eight foreign companies have applied for IPO with the Taiwan Stock Exchange (TWSE) this year. The TWSE has been reportedly striving to build ties with a few other markets including Singapore and Japan, coupled with plans to adopt measures to enhance their international competitiveness.
- According to management, the proposed listing on TWSE would provide another avenue of funding for the capital-intensive Tower Crane Rental business, and allow the group to focus on growing its other businesses (Crane Rental Division, Equipment Rental Division, and Distribution Division), as well as unlock shareholder value. Construction equipment players experience slowdown in China The owner of Kobelco Cranes, Kobe Steel, had recently cut its earnings forecast on lower excavator sales in China in 2Q.
- Nonetheless, new joint ventures formed such as the JV between Sarens Group and Sinotrans Heavy-lift company is testament to the opportunities that China continue to offer. Management also expects the Tower Crane Rental business in China to grow steadily in FY16.
Weak outlook remains unchanged
- At this juncture we have not factored in any potential gains from the spin-off, while we continue to remain cautious of the group’s performance amid economic and market weakness in ASEAN and Australia.
- Maintain HOLD, with fair value estimate of S$0.57.
Jodie Foo
OCBC Securities
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http://www.ocbcresearch.com/
2015-10-12
OCBC Securities
SGX Stock
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0.57
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