Wong Fong Industries Limited - CIMB Research 2016-10-11: Land transport engineering specialist

Wong Fong Industries Limited - CIMB Research 2016-10-11: Land transport engineering specialist WONG FONG INDUSTRIES LIMITED 1A1.SI

Wong Fong Industries Limited - Land transport engineering specialist

  • According to management, WFI group is one of the leading engineering specialists in Singapore. It has a proven track record that spans 52 years.
  • WFI reported a 30.6% yoy decline in 1HFY16 revenue and a 77% yoy drop in net profit post-IPO in Jul 2016.
  • WFI reported that its order book was US$27m as at 1 Aug 2016.
  • According to its IPO prospectus, WFI intends to pay out 20% of its net profit as dividends in FY16F and FY17F.

Engineering specialist 

  • On 6 Oct 2016, we visited Wong Fong Industries Limited (WFI), a leading provider of land transport engineering solutions and systems, according to its IPO prospectus. 
  • WFI offers a comprehensive range of products and services, which include engineering solutions and distribution of equipment and components for load handling systems, waste management systems and assistive technology and mobility aids. 
  • WFI also provides repair and maintenance services for truck-mounted cranes.

Net profit decline of 77% yoy in 1HFY16 

  • Post-IPO, WFI reported that 1HFY16 revenue fell 30.6% yoy and net profit fell 74.8% yoy. WFI attributed the decline in revenue to the projects business segment, which saw sales decline due to changes in delivery schedules of projects, delaying deliveries to the second half of 2016 and the decrease in equipment sales. 
  • Equipment sales fell due to the challenging business environment, heightened competition from new market entrants and decrease in sales of high-value equipment.


  • In its outlook statement, management commented that the WFI group expects the construction industry to be strongly supported by government projects but the weakness in the oil and gas industry may negatively affect the logistics businesses. This may, in turn, have a negative impact on demand for new and replacement equipment and/or result in an excess supply of unutilised equipment. 
  • Increased competition from new market entrants may also have a negative impact on WFI’s equipment sales revenue.

Balance sheet and dividend policy 

  • WFI was in a net cash position in FY13-15, as well as in 1HFY16. 
  • According to its IPO prospectus, WFI intends to recommend and distribute dividends comprising not less than 20% of its annual net profit attributable to owners of the company in FY16F and FY17F. 
  • WFI highlighted that its intended dividend payout will be subject to its financial performance and growth opportunities.

Historical valuation 

  • Based on its post-IPO issued capital (IC) of 235m shares and excluding the proceeds from its IPO, WFI trades at 13.6x FY15 P/E and 2.1x FY15 P/BV and its historical FY15 ROE was 15.5%.

Target Price: N/A

William TNG CFA CIMB Research | http://research.itradecimb.com/ 2016-10-11
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