Breaking News

Global markets closed higher for the week ended Dec 12, having already priced in a US interest rate hike at the Federal Reserve’s Dec 14 policy meeting. The Standard & Poor’s 500 index tested intraday record highs while the US dollar index gained 0.9%. But gold fell 0.7% on a stronger greenback and higher US Treasury yields.

The best-performing funds were those invested in Russia equities, which were lifted by the bullishness in the oil market. Brent crude oil rose 1.4% to US$55.70 a barrel after non-Opec (Organization of the Petroleum Exporting Countries) members agreed to join Opec in cutting production. Russia’s MICEX index jumped 3.2% while the ruble rallied 4.7% against the US dollar. Russia-focused equity funds that rose include the $428 million HSBC GIF Russia Equity AD fund, up 7.3%; the $1.4 billion Parvest Equity Russia C USD C fund, up 6.7%; and the $839 million JPM Russia A (dist) USD fund, up 6.6%. The $42 million PineBridge Emerging Europe Equity A fund, which had 57% of assets invested in Russia stocks as at end-October, also rose.

--The Edge

GKE Corp says newly acquired TNS has won a contract from airport gateway services operator SATS to help load and unload food trolleys and waste on aircraft during their turnarounds. Set up in 2002, TNS’ main customer is PSA International, which employs the company to help restock ships on their turnaround.

Economic Moat

About TNS Ocean Lines Pte Ltd Established in 1995, TNS Ocean Lines (S) Pte. Ltd. (formerly known as Air Sea Consolidator Pte Ltd), is principally engaged in the business of providing stevedoring and lighterage services, lashing, wharf operation services and transportation of mariner materials by sea.

As an established port operations and logistics service provider, TNS offers a wide array of port operations and logistics services within PSA’s Container Terminals & Multi Purposes Terminal and offers worldwide freight & logistics services through an integrated network of well established agents and partners.


Business Prospects

The Group expects the macro business outlook to continue to be a challenge on the back of the global economic slowdown, inflationary costs pressures and intensifying competition to affect the operating performance of the Group.

The redevelopment of 39 Benoi Road warehouse cum office property is in progress, and the Group’s wholly-owned ready-mix concrete manufacturing plant in Wuzhou, China, is ramping up its production progressively to meet with demand within Wuzhou City’s planned urbanization.

In view of the prolonged depressed oil prices and increase in the global supply of liquefied gas carrier vessels, it could be challenging for the Group to extend the chartering contract of its liquefied gas carrier vessel.

Mr. Neo added, “We are mindful of the uncertainties in our business environment and we will continue to work conscientiously to build on our twin-growth engines – (i) warehousing & logistics and (ii) strategic investments.

While we continue to broaden our capabilities and services in our warehousing & logistics segment via synergistic acquisitions such as Marquis and proposed acquisition of TNS, we will also continue to seek for viable strategic investment opportunities to build on stable and sustainable earnings base to enhance value for shareholders in the long term.”

On 28 July 2016, the Group entered into a legally binding memorandum of understanding with the vendors of TNS Ocean Lines (S) Pte. Ltd. (“TNS”), an established port operations & logistics service provider, to acquire 100% stake in TNS (“Proposed Acquisition”). TNS is profitable and provides a guarantee of cumulative net profit before tax of not less than S$3.5 million for three years. from financial period 1 December 2016 to 30 November 2019. /b]

SINGAPORE, 30 November 2016 – GKE Corporation Limited (锦佳集团有限公司), together with its subsidiaries (“GKE” or the “Group”), a leading integrated warehousing and logistics solutions provider, today announced the successful completion of its acquisition of TNS Ocean Lines (S) Pte. Ltd. (“TNS”) for S$9.0 million. TNS is now a wholly-owned subsidiary of GKE and will continue to be led by its experienced management team.

red flag

Tat Hong was founded in the 1950s and established itself as a supplier of cranes and heavy equipment in the 1970s. It has been listed on the mainboard of the Singapore Stock Exchange since June 2000.

Over the past decades, the Group expanded its operations to include Singapore, Australia, China, Malaysia, Thailand, Indonesia, Hong Kong, Vietnam, Myanmar and Papua New Guinea.

Our cranes have also been deployed in projects as far away as India and Africa. We serve customers in diverse sectors such as construction and engineering, infrastructure, transportation, industrial, oil and gas, petrochemical and power generation.

With a fleet size of more than 1,500 crawler, mobile and tower cranes ranging in size from 50 tonnes to 1,600 tonnes, we are ranked, in terms of aggregate tonnage, the largest crane-owning company in the Asia-Pacific region and seventh worldwide.

We also own the second largest tower crane fleet in the People’s Republic of China.

Backed by our immense track record and quality lifting assets, we have established ourselves as the leading name in crawler/mobile crane rental and equipment sales in Southeast Asia and Hong Kong. I

In China, our tower cranes have been involved in the construction of many iconic buildings and key infrastructural installations.

In Australia, our wholly-owned subsidiary, the Tutt Bryant Group, has a leading position in the areas of crane hire, heavy lift and shift, equipment sales and general plant and equipment hire.Tat Hong has over the past decades built a brand synonymous with quality and excellence.

DR LEONG HORN KEE Independent Chairman Dr Leong Horn Kee first joined the Board on 19 January 2001. He was last re-appointed as an Independent Director on 26 July 2013 and appointed Chairman of the Board on 14 August 2015. Dr Leong is the Chairman of CapitalCorp Partners Pte Ltd, a boutique financial advisory firm.

CHAIRMAN’S MESSAGE (abstract)

Steady Underlying Performance
Weaker revenues generated by all the Group’s business segments contributed to the 13% decline in Group turnover to S$528.2 million. Whilst this decline has had an adverse impact on our net earnings, it was the combined effect of non-cash impairments totaling S$32.7 million, unrealised foreign exchange losses of S$14.0 million and one-off loss and provisions associated with the exit of the excavator distribution business in Indonesia of S$14.2 million that led to the net attributable loss of S$39.3 million for FY2016. Of these impairment charges, S$21.1 million was in relation to asset and goodwill impairments taken by the Group’s subsidiaries in Australia due to the protracted weak economy in the country. Further, a S$10.0 million charge was recognised for the diminution in value of the Group’s investment in a listed associate in Singapore. Excluding the non-cash impairment charges, the Group would have recorded a smaller loss of S$6.6 million.

In addition, if non-cash impairments, unrealised foreign exchange losses and other one-time costs, gains and losses were excluded, the performance from the Group’s core operations remained steady with S$8.9 million in net profit contribution. During the year, our operations also generated strong cash flows of S$82.2 million and our cash position increased by S$37.4 million to S$130.7 million as at 31 March 2016. The strong cash flow from operations and proceeds from divestments were partially used to repay loans and reduce net gearing to 0.71 times from 0.77 times a year ago. Thus, the Group’s cash position has remained fundamentally and financially sound.


Prudence in Challenging Times
Historically, the Company had paid between 30%-40% of its net profits in dividends. Whilst the Group has enjoyed good operating cash flows and an improved cash position, it has nonetheless recorded a net attributable loss of S$39.3 million. In view of this, the Board has, after due deliberation, proposed that no dividend be paid in FY2016. The Company remains committed to delivering fair returns to our shareholders and the Board will recommend future dividends once the Group’s performance is able to support such dividend payouts.

Moving Forward
The Group has emerged from FY2016 as a leaner entity. We have worked hard to weather challenges in the past two years and our management and staff have shown their fortitude and strength during this trying period.


Conclusion
The headwinds we faced in FY2016 will follow us into FY2017. The Group, through its prudent actions in the past two years, has weathered the difficulties and has strengthened its operations. Our confidence in the future of Tat Hong remains strong despite the challenges we had faced. The Group has long years of solid foundation and entrenched knowledge of the industry and markets we operate in.

Our determined actions to streamline our operations will prepare the Group to better tackle any further market corrections, and will poise us to seize opportunities when the market recovers.

Source:Annual Report 2016

DIALOGUE WITH THE GROUP CEO

The net loss was attributed to non-cash accounting impairment charges of S$32.7 million, foreign exchange losses of $14.9 million (of which S$14.0 million were unrealised losses), one-time loss of S$14.2 million associated with the exit of the excavator business and S$4.6 million in other one-time costs. The Group’s continuing business excluding these one-time items was profitable

I would like to assure shareholders that the Group has a proven track record and a sound business model and our core businesses remain fundamentally strong. The one-off non-cash items arose largely from accounting treatment. I believe the Group had done a reasonably good job in right-sizing our operations, de-fleeting and trimming our operating costs in FY2016. I urge shareholders, in the evaluation of our Group’s business, to focus on the profit from our core operations, excluding one-off and non-cash items.

In FY2016, we disposed three properties (one each in Singapore, Malaysia and Australia), cranes, a barge and S$10.0 million worth of general equipment. We have used part of the proceeds to pay down our borrowings which in turn improved our net gearing to 0.71 times from 077 times last year.

Whilst we will continue to identify under-utilised assets for disposal, we are mindful of the needs of the market. The Group is proud to own the right composition of cranes with different lifting capacities in the markets we operate in to stay relevant and to continue to be a market leader in delivering comprehensive services and solutions to our customers.

The right-sizing and de-fleeting programmes yielded savings of $20.4 million in operating expenses mainly in the areas of manpower and maintenance expenses (including the positive effect of a weaker Australian dollar on costs). In addition there were savings of S$8.9 million in depreciation charges as well as S$1.3 million in interest cost

The Group had implemented a strict hiring policy in FY2015 and this had been adhered to in order to maintain an optimal workforce. In FY2016, we have reduced headcounts in Australia, Indonesia and Singapore substantially.

However, our operations in China, Hong Kong and Malaysia experienced increased business activities and recorded higher utilisation rates especially in the second half of FY2016 and the workforce in these countries were expanded accordingly. Hence as at 31 March 2016, our total workforce at 4,254 was marginally higher than the workforce of 4,240 a year ago.

We have on 15 March 2016 made an announcement that the Company had been approached in relation to a potential acquisition of its shares. As discussions are still on-going, we do not have any further information that we can share with shareholders at this point in time. Should there be any material developments, we will make timely disclosures via the SGXNet.


The Group’s subsidiary in Australia, Tutt Bryant Group (TBG) has three lines of businesses namely crane rental, general equipment rental and the distribution of cranes and construction equipment.

All the three business lines have been badly affected by the protracted slowdown in Australia which was caused by a collapse in commodity prices particularly those of iron ore, copper, etc.

As we do not foresee a quick recovery in global commodity prices, the slowdown could last for some time. Unless the Australian government starts investing heavily in infrastructure to stimulate the economy, TBG’s performance is expected to be muted in the short term.

Whilst the Group does not have a large exposure to the oil and gas sector, there was nonetheless some impact to our barge rental and crane rental business in Southeast Asia in FY2016 due to a decline in demand from this sector.

In Australia, we have been involved in LNG projects for the past few years but many of these are nearing completion and as there have been no new projects announced recently, revenue was also affected.

It is our strategy not to be overly dependent on any one sector. Besides oil and gas, the Group serves a broad spectrum of customers in the infrastructure, transportation, power generation, industrial, engineering and construction sectors.

In Australia, our focus would be to stablise the operations. We have already trimmed assets and headcounts extensively and we will work our remaining assets and resources harder.

In the Southeast Asia and Hong Kong, we will continue to look at infrastructure projects especially those that are related to the One Belt One Road (OBOR) China-led initiative.

We have an extensive footprint in Southeast Asia and good contacts with the large Chinese state-owned construction companies which are starting to be active in infrastructure projects in the region.

Therefore we are in a good position to participate in these OBOR projects when they come on-stream. China continues to be a growth market for us and we have a strong pipeline of committed projects. Thus our focus would be on delivering quality services with emphasis on operational efficiency and safety.


The Group has a balanced debt maturity profile and a diverse source of funds including a syndicated loan, medium-term notes, revolving loans as well as fi nance leases.

Borrowings due to be repaid within one year comprised S$133.4 million in finance leases, trust receipts and term loans as well as revolving credit of S$116.6 million which can be re-fi nanced when they become due.

With its healthy cash position and expected future cash flows, the Group is in a strong financial position and has more than sufficient means to repay its financial obligations when they become due in the next 12 months.

BUSINESS PROSPECTS

The Group’s performance in most of its key markets is expected to remain subdued in FY2017. The market weakness and the impending completion of projects in the ASEAN countries and in Australia will continue to impact the Crane Rental Division. Efforts to reduce operating costs through fleet rationalisation and operational restructuring will continue.

The Tower Crane Rental Division in the People’s Republic of China is expected to perform well on the back of a strong pipeline of committed projects in the building, infrastructure, transport and power generation sectors.

The General Equipment Rental Division is expected to turn in a weak performance due to the lack of public projects and increased competition from the oversupply of equipment in Australia. Weak demand in the region and competitive market conditions will continue to affect the Distribution Division’s performance.

To strengthen the Group’s financial position and improve its financial flexibility, the Company today separately announced that it will be undertaking a renounceable underwritten rights issue (the “Rights Issue”) to raise up to approximately S$41.1 million in net proceeds.

The Rights Issue will be fully underwritten with Mr Roland Ng San Tiong, Managing Director and Group CEO, and certain parties acting in concert with him, providing irrevocable undertakings to the Company to subscribe for up to an aggregate of 77.6% of the total maximum number of rights shares under the Rights Issue.

Mr Ng stressed that the Ng family still believes firmly in the long term prospects of the Tat Hong Group and hence their decision, together with concerted parties, to irrevocably undertake the subscription of up to 77.6% of the Rights Issue.