Tiong Woon Corporation BQM -2.13%   has won a contract from Takenaka Corporation for the proposed erection of a new manufacturing facility at Pasir Ris Industrial Drive 1.

 

The contract, which was secured by Tiong Woon&rsquo s wholly-owned subsidiary, Tiong Woon Crane Pte. Ltd, includes integration works with additions and alterations to existing blocks at the facility.

 

The scope of work includes the supply of cranes, provision of heavy lifting services, and providing engineering expertise and project management services throughout the project, says the group.

 

The project will begin in the 2HFY2023 ending June 30 and is expected to be completed by October. It is expected to contribute positively to the group&rsquo s revenue for the FY2023 and FY2024.

 

&ldquo We are delighted to have been awarded this contract for the construction of the new manufacturing facility &ndash it is a testament to our team&rsquo s commitment to providing high quality engineering and construction services. We look forward to working with all stakeholders involved to ensure that this transformation project is completed on time and within budget,&rdquo says Ang Guan Hwa, executive director and CEO of Tiong Woon.

Crane company Tiong Woon Corp Holdings has reported earnings of $11.4 million for FY2022 ended June, up 15% y-o-y. Revenue in the same period was up 9% y-o-y to $122.6 million, driven by the pick up in construction activities.

 

The company enjoyed a better gross margin of 40.2% for FY2022, versus 37.6% recorded in FY2021, mainly due to better performance in heavy lift and haulage segment.

 

The company plans to pay a final dividend of 0.35 cent per share, plus a special dividend of 0.15 cent. For the preceding FY2021, it paid 0.4 cent.

 

The company notes that the operating environment continues to be challenging and uncertain, as rising interest rates, inflationary pressures, ongoing geopolitical tensions, pose disruption risks to the nascent market recovery.

 

&ldquo The group&rsquo s priority is to ensure that it has adequate liquidity to sustain its business, manage its cashflow, operating costs and business risks, amid the uncertainties posed by the business environment,&rdquo adds Tiong Woon.

 

UOB Kay Hian (UOBKH) has initiated coverage on crane specialist Tiong Woon Corporation : BQM -2.7% with a &ldquo buy&rdquo call and a target price of S$0.88, which implies a potential upside of 63 per cent from the stock&rsquo s Monday (Aug 22) closing price of S$0.54. 

 

UOBKH&rsquo s valuation is based on a FY2022 price-to-book (P/B) multiple of 0.7, which is 1 standard deviation above the long-term historical mean. 

 

Its analyst John Cheong believes that current valuations of the stock&rsquo s FY2023 price-to-earnings multiple of 4.4 and P/B of 0.4 are attractive, given the group&rsquo s &ldquo market-leading position and strong earnings-per-share (EPS) growth in an industry upcycle&rdquo . 

 

&ldquo Compared with its peers, Tiong Woon offers higher growth and return-on-equity,&rdquo added Cheong. 

 

The analyst expects Tiong Woon&rsquo s EPS to double in FY2022, followed by a 37 per cent year-on-year growth in FY2023 with a strong construction upturn and the resumption of more oil & gas capital expenditure driving growth for the group. 

 

&ldquo The company&rsquo s strong earnings growth will be driven by the improved utilisation rates and higher rental rates of its cranes due to demand from contractors. This will lead to an increase in its gross margin, followed by better earnings,&rdquo he explained. 

 

Cheong is also projecting Tiong Woon to report gross margin expansion of 42 per cent for FY2022 and FY2023 as well as 41 per cent for FY2024. 

 

In his view, Tiong Woon&rsquo s &ldquo comprehensive ownership&rdquo of cranes puts the group in a good position to benefit from strong demand in the coming years, driven by accelerating construction of public housing and mega infrastructure projects in Singapore. 

 

Construction of more petrochemical plants could further boost crane demand, he added.