Tiong Woon Corp. (TION.SI, S$1.08,O, TP S$1.40) Emerging heavyweight
Su Tye Chua / 6212 3014 /
[email protected]We initiate coverage of Tiong Woon with a 12-month target price of S$1.40 and an OUTPERFORM rating, implying 33% upside.
Tiong Woons heavy lift and haulage segment, with a niche in heavy tonnage (>1000 tonnes) is its core business, and remains a significant earnings
driver going forward, on higher utilisation rates, coupled with stronger rental yields.
Tiong Woons recently-acquired 64-hectare fabrication yard in Bintan (Indonesia) for offshore production facilities has won its maiden project early
this year. We expect order momentum to pick up, with margins improving due to scale, and increased efficiencies. We forecast earnings CAGR of
23% through FY10E.
Our DCF valuation methodology is on WACC of 10.2%, and a terminal growth rate of 3%, implying an end-2008 P/E of 15x, undemanding given the
strong underlying earnings profile.
Key risks are economic downturn curbing construction spending, execution risks given tight project schedules, default of main contractors, regulatory
changes, and industry concentration.
