Date of Report: 24 September 2024
Broker Name: UOB Kay Hian
Company Overview
Tiong Woon Corporation Holding (TWC SP) is a Singapore-based industrial services company specializing in heavy lift, heavy haulage, and engineering services. The company operates primarily in Singapore but also has a strong presence in regions like Thailand, the Middle East, and India. Tiong Woon’s business focuses on providing crane services and transport solutions, primarily for the petrochemical and construction sectors.
FY24 Financial Performance
For the financial year 2024 (FY24), Tiong Woon posted earnings of S$18 million, marking a 16% year-on-year (yoy) increase. This growth was driven by a 6% yoy rise in revenue from its heavy lift operations across its key operating regions. However, the earnings fell short of the broker’s expectations by 14%, primarily due to lower-than-anticipated revenue growth resulting from project delays in Singapore and India.
Heavy Lift and Haulage: Key Growth Driver
The heavy lift and haulage segment continues to be the company’s primary growth driver. In FY24, revenue in this segment grew by 5% yoy, with a 23% yoy increase in profit. By geography, growth was driven by:
- India: 41% yoy increase
- Singapore: 2% yoy increase
- Middle East: 105% yoy increase
- Thailand: 83% yoy increase
However, revenue from Indonesia declined by 34% yoy, slightly offsetting the gains made in other regions.
Margins and Profitability
Tiong Woon’s gross profit grew by 9% yoy to S$59 million in FY24, and its gross margin increased to 41.2%, up from 39.9% in the previous year. This improvement was driven by higher-margin construction projects. Despite the delays in some projects, the company’s overall profitability remains strong, supported by its diversified geographical presence and robust demand for heavy lift services.
Dividend Proposal
Tiong Woon proposed a record-high dividend for FY24. The total dividend is set at 1.5 Singapore cents per share, representing a 50% yoy increase from the FY23 dividend of 1 Singapore cent per share. This increase reflects the company’s growing earnings and management’s commitment to returning value to shareholders.
Positive Outlook for FY25
Despite missing expectations in FY24, the company maintains a positive outlook for FY25. Tiong Woon is witnessing buoyant demand for its heavy lift and haulage services, particularly in Singapore’s petrochemical and construction sectors, as well as in markets like India, Saudi Arabia, and Thailand. Management expects further growth in these regions, particularly as the company continues to invest in heavier tonnage cranes to meet rising customer demand.
Valuation and Investment Opportunity
UOB Kay Hian maintains a BUY rating on Tiong Woon with a revised target price of S$0.87, slightly down from the previous target of S$0.90. The new target price is based on 0.62x FY25F price-to-book (P/B) ratio. The company is currently trading at an attractive valuation, given its solid financial position and strong future growth prospects.
Financial Projections (2024-2026)
- Revenue:
- 2024: S$143 million
- 2025F: S$153 million
- 2026F: S$164 million
- Gross Profit:
- 2024: S$59 million
- 2025F: S$59 million
- 2026F: S$60 million
- Dividend:
- FY24: 1.5 Singapore cents per share (50% increase yoy)
Conclusion
Tiong Woon Corporation Holding faced some challenges in FY24 due to project delays but is well-positioned for a brighter FY25. With growing demand across its core markets, an improving margin profile, and a record-high dividend, the company remains an attractive investment opportunity. The stock offers solid growth potential, supported by a positive outlook in both the petrochemical and construction sectors across its operating regions.
