Singapore’s Tower Crane Leasing Industry

Following our previous post on our thoughts on the privatisation offer of Tat Hong Holdings, we thought we share some of our findings on the Tower Crane Leasing Industry within Singapore.

Within Singapore there are 3 main listed players – Tat Hong Holdings, Sin Heng Heavy Machinery and Tiong Woon Corporation.

While all 3 players are in tower crane leasing there are slight differences in terms of the industries that they supply their cranes. For example, Tat Hong only supplies to the construction industry whereas for Sin Heng and Tiong Woon, they service the Oil & Gas and Offshore Marine industries alongside the construction and infrastructure industry. However, all in all, looking at the capital cycles given how the construction, O&G and Offshore Marine sectors have been on the decline, these companies have been hit in terms of their valuations. Hence, this was what prompted us to look into the industry.

Valuations

Looking at the valuations, one would notice that all 3 companies are trading at very low price to book ratios. The recent run up in Tat Hong’s valuations was due to the privatisation offer.

Leverage

Comparing all 3 companies, we noticed that they have all been paring down debt over the years, reducing excessive inventory and controlling capital expenditures. Something that is similar amongst all the tower crane leasing companies are that they are all very highly leveraged with debt to equity close to 50%. However, after factoring in the cash position of each company, one would notice that Sin Heng is much less leveraged amongst the 3.

Thoughts

Given a choice, we do prefer Sin Heng Heavy Machinery for its risk reward ratio – where we find that the upside potential is far higher than its downside risk. In the case for Tiong Woon Corporation and Tat Hong Holdings (before it got the privatisation offer), markets were pricing it like in the case of a default scenario. However, one has to note that Sin Heng has a far lower liquidity of the 3 companies and it would be hard to accumulate a sizeable position in this company.



About the Author

SG Value Investor
I developed my passion for investment management especially equity research at a relatively young age. My investment journey began when I was 20, at a point in time where markets were still recovering from the Global Financial Crisis. My portfolio started from money I saved over the past years and through working during the holidays. I was fortunate to have a good friend with common investing mentality to began my journey towards value investing. To date, we still research and invest in companies together, discussing valuations and potential risks of a company. To date, I manage a fund with a value investing style. Positions are decided upon via a bottom-up approach or smart speculation (a term I came up with when buying a stock for quick profit due to a mismatch in prices in the market due to takeovers/selling of a subsidiary or associate). Apart from managing my own portfolio, I enjoy sharing my research with family and friends, seeking their opinions and views towards the stock. Reading Economics in London, I constantly keep up with the financial news in Singapore & Hong Kong. Despite my busy schedule, it has not stopped me from enjoying other aspects of life. I enjoy a variety of activities in whatever free time I may have – endurance running, marathons, traveling, fine dining, whiskey appreciation, fashion. Lastly, I enjoy meeting new people, discussing ideas and gaining new perspectives towards issues in the world.