In Part 2, I will be examining the Business Unit performance for Tat Hong’s various divisions (they have 5 in total) and commenting on the margins for each division. Please note that the financial crisis may skew the numbers during this period, thus it may not be representative of the actual gross margins in terms of the average performance for each division over the long-term. I will need more time and data to compile in order to see the trend of gross margins and also the core performance of each division as a comparison against Management’s stated growth plans.

Business Unit Revenue Analysis

Looking at 1H FY 2010 (“this year”) versus 1H FY 2009 (“last year”), one can clearly see a trend of revenues shifting from equipment sales to crawler crane rental. For this year, crawler crane rental took up 34.5% of revenues, up from 24.6% last year. By contrast, equipment sales % fell from 46.9% to just 32.2%. If we add up Tower Cranes’ share of revenues, then for crane rental for this year, the proportion of contribution to revenue jumps to 41.4%, versus just 27.7% last year. That is a significant jump of 13.7 percentage points and does demonstrate Management’s commitment to transforming Tat Hong into a “rental” company. Of course, if we are comparing revenues on a year on year basis, the drops have been pretty steep due to the severity of the global downturn; and Tat Hong is after all in a cyclical industry where the demand for their cranes and heavy machinery stems from economic growth and policies which affect construction and oil and gas industries. Read more…