I guess this review and analysis is long overdue, since Tat Hong released their 1H FY 2010 results back in November 2009! But then again, since I only do half-yearly reviews and analyses, I figured it’s better late than never. Anyhow, I will NOT be analyzing Tat Hong’s upcoming 3Q 2010 results, so readers should expect that this will be the only analysis on Tat Hong until they release their FY 2010 some time in May 2010. This analysis will take on the usual format of analyzing the Income Statement, Balance Sheet and Cash Flows in Part 1, the Business Unit Breakdown and Inventories in Part 2, and end off with prospects and future plans for Part 3.
Income Statement Review
Do note that 1H 2010 was a very dismal period for the Group as the global financial crisis hit home and caused a sharp drop in revenues as companies held back spending on capital expenditure (i.e. cranes and heavy equipment). This led to a huge drop in equipment sales of 56% in 1H 2010 compared to 1H 2009. Consequently, total revenue fell 35.6% from S$375 million to S$241.6 million. The drop would have been steeper if not for the cushioning impact of Tat Hong’s rental of crawler and tower cranes. These 2 divisions helped to mitigate the impact of the downturn somewhat. Gross margins actually improved from 36.8% to 39.6% as a result of the change in sales mix towards higher margin rental instead of lower margin equipment sales. More on this breakdown in Part 2. Read more...