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Crane operator Tiong Woon rides post-pandemic growth cycle

Bryan Wu
Bryan Wu3/16/2023 05:01 PM GMT+08  • 9 min read
Crane operator Tiong Woon rides post-pandemic growth cycle
Tiong Woon CEO Michael Ang remains “cautiously optimistic” that customer demand for heavy lift and haulage services will remain resilient this year. Photo: Albert Chua/The Edge Singapore
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Companies around the world have acknowledged the challenging business environment created by the recent macroeconomic and geopolitical instability. But as concerns over a slowdown in the global economy in 2023 continue to mount, one of Singapore’s largest crane operators, Tiong Woon Corp BQM %

, is poised to hitch its business to the pent-up growth of the construction as well as oil and gas sectors borne of this volatility.

On Feb 14, the integrated heavy lift specialist and service provider reported revenue of $65.9 million in 1HFY2023 ended Dec 31, 2022, up 8% y-o-y on a pick-up in construction activities across the region.

Despite broader uncertainty, Tiong Woon says it remains “cautiously optimistic” that customer demand for heavy lift and haulage services will remain resilient in Singapore and its other key regional markets.

Earnings for 1HFY2023 were down slightly to $7.2 million from $7.8 million in the year-earlier period, due to an operational exchange loss of $3 million arising mainly from the revaluation of intercompany balances following the appreciation of the Singapore dollar during the period.

This year, Tiong Woon, which supports the oil and gas, petrochemical, infrastructure and construction sectors, is seeking new growth from the progressive resumption of construction activities that were interrupted by Covid-19 to improve its earnings.

Evidently, contracts are returning. On Feb 21, the company announced that Japanese contractor Takenaka Corp had awarded it with a contract in the construction of a manufacturing facility in Pasir Ris. The value of the contract was not disclosed, although Tiong Woon says it will contribute positively to the company’s revenue for FY2023 and FY2024.

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Housing backlog

This relatively constructive picture is a far cry from the crippling outlook that Tiong Woon faced just three years ago when the pandemic hit. Many of its major heavy-lift construction projects in Singapore, as well as in Malaysia and India, were halted by strict government lockdowns, recalls CEO Michael Ang in an interview with The Edge Singapore.

The company’s business model primarily involves the leasing of heavy lifting equipment to other contractors. In addition, customers can choose to hire both the equipment and their specialised operators from Tiong Woon in leasing contracts or “packages”.

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While some of Tiong Woon’s projects in oil and gas and port logistics were deemed “essential services” and therefore not subject to the lockdowns introduced in April of 2020, the company still keenly felt the labour shortage that hit the entire industry and could only “function minimally”, says Ang.

He adds that Tiong Woon continued to face “massive delays” in its major projects during the first year of the pandemic, and began to see a “turnaround” only going into 2021 as some of its projects resumed and its labour force trickled back after being released from quarantine. For example, one of its clients was able to resume the construction of HDB flats using pre-fabricated parts, which involves extensive use of heavy cranes to lift ready-made pieces on top of one another for final assembly.

In January this year, HDB said that some 40% of ongoing BTO projects remain delayed owing to the Covid-19 pandemic, and that it expects the backlog to clear in about two years. The proportion of delayed BTO projects has fallen from more than 90% in 2021, with the worst of the pandemic over and the workforce mostly back to full strength.

Tiong Woon is confident that demand for tower cranes will remain strong. “As a pioneer in the importation of heavy lift tower cranes for the sector, that’s something that we feel will benefit our business strongly,” says Ang.

‘Neglected’ oil and gas

Meanwhile, Tiong Woon is also set to benefit from higher energy prices triggered by Russia’s invasion of Ukraine. The company’s equipment is deployed at oil refineries, as well as in the construction of oil rigs. “We do see that there has been more activity in the oil and gas sector coming up, and we’re engaging with clients in that space a bit more frequently,” says Ang.

From his perspective, the oil and gas sector has been somewhat “neglected” in the past decade, with focus squarely on the transition to renewable energy. As a result, conventional energy projects have been starved of significant amounts of final investment decisions (FID).

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With oil prices trading between US$80 ($107.53) and US$100 per barrel, this has created “incentive” and “interest” for investors to reexamine potential in the industry, says Ang. For example, energy consultancy Rystad estimates that the offshore oil and gas industry will see more than US$200 billion worth of new investments over the next two years — marking the highest level of commitment in a decade. “We’re hopeful that this momentum can be maintained,” says Ang.

Tiong Woon will be “refocusing” some of its attention on Saudi Arabia in consideration of new projects being created in the country. In February, the country’s state-owned oil giant Saudi Aramco announced that it expects to award contracts for some 90 projects over the next three years as it presses ahead with major expansions of its upstream oil and gas capacity.

Aramco says that from 2023 through 2025, it expects to tender and award contracts for 66 projects related to oil and gas processing and refining facilities, 14 related to pipelines and distribution and 10 for civil infrastructure and security systems.

This bodes well for Tiong Woon, whose wholly-owned subsidiary TWC Arabia was the first Singaporean company to receive a licence to operate a 100% foreign-owned company in Saudi Arabia. Awarded by the Saudi Arabian General Investment Authority (SAGIA) in 2008, the licence allows TWC Arabia to execute contracts for lifting, installation and maintenance services on equipment for oil, gas, petrochemical and electrical power-related projects and marine transportation services in the oil-rich country.

No China woes

Tiong Woon will also be focusing on expanding further into India, which has been a “bright spot” for the company and where some of its heavy machinery is located, says Ang. India will hopefully provide a more stable platform of operations for Tiong Woon compared to its South Asian neighbour Sri Lanka, which had also been a promising market for Tiong Woon until its spectacular economic collapse in 2022 forced the company to exit the market.

Ang says that the company ceased operations in the crisis-riddled Sri Lanka several months ago, around the same time it decided to pull its operations from Yangon after the 2021 political coup in Myanmar. The geopolitical instability of two of Tiong Woon’s former markets are some of the wider challenges that it has had to contend with in the current uncertain business environment, he says.

Perhaps fortunately for the company, unlike many other regional businesses that are waiting with bated breath for China’s reopening story to play out, that particular market has played a relatively muted role in Tiong Woon’s financial performance. “It’s nice to see that China is coming back, but our presence in China is quite minimal and is relatively insignificant to our portfolio,” says Ang.

For FY2022, the company’s heavy lift and haulage segment’s external revenue increased by $4.7 million or 8% y-o-y to $63.8 million in 1HFY2023, due primarily to higher revenue derived from India, Singapore and Indonesia, and offset by lower revenue derived from Vietnam and China.

On the other side of the ingot, Yongmao Holdings, another crane operator listed on the Singapore Exchange (SGX) with significant operations in China, saw its earnings decrease by some 14% y-o-y to RMB38.3 million ($7.49 million) for the 1HFY2023 ended Sept 30, 2022.

In its financial statement — released on Nov 9 last year, about a month before China’s sharp reversal of Covid-19 policy — Yongmao said that the Chinese economy faces challenges, as the country contends with a prolonged property slump, an economic slowdown and risks of global recession, as factory output across Asia slowed down.

Meanwhile, Asia Pacific’s largest crane owner — and Tiong Woon’s biggest competitor — Singaporean company Tat Hong Holdings is supposedly considering a divestment of Tutt Bryant Group, the Australian construction machinery and equipment firm acquired by Tat Hong in 2010.

Tat Hong, which subsequently took Tutt Bryan private and delisted the company from the Australian Securities Exchange (ASX), is reportedly seeking more than US$500 million for the unit, according to Bloomberg.

The Singaporean company, which owns the second-largest tower crane fleet in China, was listed on the SGX until 2018. Later in 2021, Tat Hong listed its China business, Tat Hong Equipment Service Co on the Hong Kong Stock Exchange (HKSE), raising some US$83 million in the process.

For its 1HFY2023 ended Sept 30, 2022, Tat Hong Equipment recorded losses of RMB 41.8 million. It had earlier issued a profit warning in which it attributed the anticipated “turnaround from profit to loss” to a dramatic increase of exchange loss arising from foreign currency loans, and a decrease in revenue owing to the ongoing outbreak of the Covid-19 and the corresponding control measures in Eastern China where some of its projects had been delayed.

Ang of Tiong Woon says that China, in which the company has been present for “quite some time”, remains a “special market” for its business. “We will continue to service our existing customers in the Chinese market but it’s not exactly a key growth area for us,” he says, explaining that outside of Singapore, the company will keep its focus on its existing Southeast Asian operations in Indonesia, Malaysia, Thailand and Vietnam, as well as further afield in India and Saudi Arabia.

Tiong Woon’s improved prospects have yet to be reflected in its share price. Over the past year, the company’s shares have dropped 7.6% to trade at 46 cents as at March 15, valuing the company at 9.83 times its earnings. As at Dec 31, 2022, Tiong Woon’s net asset value was $1.23 per share. Yongmao Holdings last traded at 71 cents, up 14.5% over the past 12 months, valuing it at 6.52 times its earnings. Hong Kong-quoted Tat Hong, meanwhile, is up 32.7% over the past year, closing at HK$1.42 (25 Singapore cents) on March 15.

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