Lim & Tan's Nicholas Yon and Chan EN Jie have maintained their "buy" call on Tiong Woon Corp, citing how the crane operator stands out as a rare listed entity here that has a positive outlook of its business and of its industry.
In their Oct 25 note, Yon and Chan figure that the company, as a regional heavyweight in the heavy lift industry, is trading at a significantly undervalued level.
"There exists a notable perception gap between the market’s perception and reality regarding TWC’s capabilities, which are on par with international industry giants, yet remain relatively unknown. This presents a strong potential for a re-rating," the analysts note.
Yon and Chan figure that having gone through the pandemic, Tiong Woon is starting to win more business both within Singapore and in overseas markets and be on track to surpass its previous record earnings of $22 million recorded in FY2014.
As a sign of its confidence, the analysts point out that Tiong Woon investing in more heavily powered cranes that will help it capture more business in the current upcycle of the construction and petrochemical industries.
"With Ting Woon’s operating leverage, we are confident project visibility will pave the way for margin expansion, increased profitability and dividends," the analysts say.
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Meanwhile, despite profits at a record high since its last downturn in FY2017, Tiong Woon is far from the cycle peak and trading at distressed valuations of 0.4x PB, 6.2x FY24F PE and 2.7x FY24F EV/ EBITDA.
Their target price of 88 cents is at a 40% discount to its peers EV/EBITDA, which Yon and Chan explain is so because of the company's small market cap and low trading liquidity.
"We believe the time for a sector rerating is imminent and Tiong Woon remains the cheapest and the biggest laggard in the construction industry, which should translate into supernormal gains for investors in time to come," state the Lim & Tan analysts.
