Published August 31, 2009

Tiong Woon well-positioned for upsurge

By VEN SREENIVASAN

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AFTER being down in the dumps for the better part of a year, sentiment has improved both in the financial and the asset and commodity markets.

New heights: Tiong Woon's heavy lift equipment gives it a full suite of capabilities to meet the strong pickup in demand for its services from the offshore oil & gas industry

Activity in the construction, offshore oil & gas and infrastructure sectors has picked up steadily over the past few months, while the property market seems to have taken off at a scorching pace.

One company which appears nicely positioned to capitalise on these uptrends is mainboard-listed Tiong Woon Corporation.

Tiong Woon's fourth quarter results, announced last week, provide a glimpse of its prospects for the year ahead.

The heavy lift & haulage specialist which provides critical logistics services support for the oil & gas sector, lifted its fourth quarter earnings by a whopping 71 per cent to $12.2 million, beating all analysts' forecasts.

This raised its full year net profit by a huge 51 per to $42.3 million, from $28 million a year earlier. Revenue rose 28 per cent to $202.3 million, up from $157.8 million in FY08. The profit would have been higher if the company had not written down some $6.2 million in financing costs for a $65 million ongoing pipe-laying barge building contract from Norwegian charterer, NorCe.

Tiong Woon may not be as familiar a name as Rotary Engineering or Tat Hong Holdings. But it is entering a growth cycle which the former is also enjoying at the moment, and which the latter rode during the 2005-2007 construction boom.

The company is already one of the most established heavy lift and haulage operators in the region, with key capabilities to take on critical turnkey projects for international builders and contractors, especially in the oil & gas, power and petrochemicals space.

It also operates a 64-ha marine fabrication yard in Bintan with capabilities to build and repair offshore operations vessels and barges, a business segment which is showing signs of good recovery.

But the company's overwhelming strength is its heavy lift and haulage arm, which accounted for $52.2 million in pre-tax earnings and $130.6 million in topline revenue. Its 321 heavy lift and other land-based and marine equipment gives it a full suite of capabilities to meet the strong pickup in demand for its services from the offshore oil & gas industry as the price of oil climbs steadily past the key US$70 per barrel level.

Demand for its heavy haulage cranes has grown sharply over the past eight months, not only pushing up rental rates and margins (its margins for heavy lift rose from 38 per cent to 41 per cent during Q4 2009), but also prompting the company to start boosting its fleet size.

Tiong Woon is already a key sub-contractor to companies like Rotary Engineering and Hiap Seng, which have recently been seeing huge inflows of new contracts, not just from Singapore and Jurong Island, but also Malaysia, Indonesia, Thailand and as far off as Saudi Arabia. There is now widespread expectation that the company could soon announce major contracts with oil majors themselves, both here in Singapore and around the region.

Meanwhile, at its Bintan yard, Tiong Woon is refocussing on the higher margin and quicker turnaround ship-repair jobs. Once the NorCe vessel is delivered shortly, its current slipway will be freed up to take in waiting customers. Plans are also underway to build another slipway at some $600,000, which will significantly increase its ship-repair capacity and turnaround to meeting rising demand from the offshore oil & gas industry.

With almost $17 million of cash, the company has the financial muscle to scale up to meet the growing demand for its services. But analysts expect this cache to rise to $45 million by June 2010, with free cashflow rising to almost $110 million.

The ongoing recovery in the energy and commodity sectors will benefit some companies more than others. Based on the growing demand for its services and its strength in operating numbers, Tiong Woon clearly appears to be sitting pretty in the former category.