For its 2HFY2025 ended June, Tiong Woon reported revenue of $164 million, up 14% y-o-y. However, earnings dipped by 4% y-o-y to $7 million on margin pressure and less favourable project mix.
For the whole of FY2025, earnings grew by 6% y-o-y to $19 million, which was 98% of their estimates.
In FY2025, to grow its fleet, the company incurred higher capex of $65.5 million, up 5% over FY2024, which led to higher borrowings of $111.8 million, up 20% y-o-y and lower cash balance of $62.6 million, down 21% y-o-y.
Despite the lower 2HFY2025 earnings and cash balance, the company plans to increase its final dividend to 1.75 cents from 1.5 cents, equivalent to a pay out ratio of 21% from 19%.
See also: Could UOL list a REIT?
From the perspective of Mo and Cheong, the higher dividends is an indication of the management's confidence in sustainable earnings.
"Tiong Woon remains confident of resilient demand across its core markets, underpinned by petrochemical, semiconductor, infrastructure, and construction activity.
"Leveraging its position as a one-stop heavy lift specialist, we are of the view that Tiong Woon is well-positioned to capture opportunities while staying disciplined in cost and cash flow management. Fleet renewal and expansion should further drive efficiency and strengthen its competitive edge," they add.
See also: RHB keeps ‘buy’ on CSE Global at raised target price of 86 cents from 63 cents previously
For the current FY2026 and coming FY2027, Mo and Cheong have lowered their margin assumptions by around 2 percentage points, due to the expected continued cross-hiring of equipment to meet project demand.
On the other hand, they have raised their revenue forecasts by around 12% on stronger demand across Singapore, India, Saudi Arabia and Thailand.
As a result, their FY2026 earnings forecast has been trimmed by 4% and FY2027's by 7%.
Their new target price of 73 cents is based on 0.5x FY2026 P/B, which is 0.5 sd above its historical 15-year average P/B, up from 0.45x previously, which is its historical mean.
"While demand drivers remain strong and Tiong Woon has reinforced its global standing, the ongoing high capex cycle is expected to weigh on free cash flow, raise gearing, and cap near-term upside.
"Looking ahead, successful deployment and utilisation of new cranes, coupled with margin recovery as cross-hiring eases and higher-tonnage cranes are progressively deployed, could serve as catalysts for an upgrade in the medium term," the analysts say.
Tiong Woon shares changed hands at 78 cents as at 2.53 pm, down 1.27% thus far today but up 27.05% year to date.
