07.08.2008

Tat Hong says no reason for share price drop

Tat Hong the Singapore based crane sales and rental company has issued a statement saying that there is no reason why its share price should have fallen so sharply. The statment adds:

“The Group is not aware of any reason or development that has, or could, have a negative impact on its share price, which has fallen sharply over the past few days. Tat Hong reiterates that its fundamentals remain sound and sectoral outlook continues to be positive. Increased governmental spending on infrastructural projects in the region, together with the construction and Oil & Gas boom continue to fuel strong demand for cranes and heavy equipment.”

Tat Hong is scheduled to announce its first quarter 08/09 results next week and as a result says that it is not able to elaborate further and to provide any financial update on its performance. Although it does say:

"Tat Hong had reported sterling performances in the past two years. The first quarter 2009 performance will include maiden contribution from our new tower crane division, which was established in late FY2008.”

Tat Hong has also announced it has reached a S$12.6 million convertible loan agreement with Hiap Tong Corporation a Singapore based crane rental and transport company, which has applied for an initial public offering and listing of its shares on the Singapore exchange. The convertible loan agreement is convertible into ordinary shares representing 20 percent of the issued share capital of Hiap Tong.

Vertikal Comment

Tat Hong started the year at s$3.40 dropping to s$1.80 by early July, but has now plunged to s$1.24.

Tat Hong is a major player in the Pacific rim crane business including Australia where it owns Tutt Bryant. The company has a track record for participating in convoluted financial transactions just prior to a flotation.

The most recent was Yong Mao the Chinese tower crane company, where Tat Hong had a significant holding which it reduced prior to flotation then began building it back up again after its IPO.

The transactions and its corporate structure, while all above board, are complex for a company whose main business is renting and selling cranes. On top of this the company rarely discusses the strategy behind its financial plays. The loan agreement to Hiap Tong, a competitor, just as it is preparing for an IPO for example, came with no explanation of what it hopes to achieve by this move.

Given the current economic climate, perhaps this is what is putting investors off more than any concerns about the company’s growth and profit prospects?