SINGAPORE (Aug 19): OCBC Investment Research is maintaining its “hold” rating on crane and heavy equipment supplier Tat Hong Holdings, with a slightly lower fair value of 54 cents from 55 cents previously.  

(See Uncertainty weighs on Tat Hong)

In a Friday report, analysts Jodie Foo and Eugene Chua opine that the construction industry’s tepid outlook is likely to continue weighing on earnings recovery in general.

Tat Hong last week posted losses of $3.6 million in 1Q17 on unrealised foreign exchange (forex) losses arising from unfavourable currency movements. Revenue declined 16% from a year ago as all segments recorded lower revenues, save for the tower crane rental (TCR) segment.

(See Tat Hong swings into the red in 1Q over forex losses)

Foo and Chua note that overall, the sector continues to face losses. This was underscored by the profit guidance notices released by two of Tat Hong’s peers, Tiong Woon Corporation and Sin Heng Heavy Machinery, both of which expect to report net losses for FY16.  

Unlike its peers in the construction sector which largely generate revenue from Singapore, Tat Hong differs by having relatively diversified revenue exposure to several key markets, such as in Australia and China. However, the analysts believe this will do little to boost the company’s performance as demand in most markets is likely to remain subdued – especially in Australia’s case.

“We expect the TCR segment to offer support to Tat Hong’s earnings,” say Foo and Chua.

“Tat Hong’s share price is likely to be supported to some extent by an on-going possible transaction as previously announced by the company,” they add.

As at 11.09am, shares of Tat Hong are up 1.9% at 54 cents.