Tat Hong still has plenty of upside: OCBC

Tat Hong still has plenty of upside, despite its sharp rise, amid higher rental rates and increased infrastructure activities, OCBC says. It notes plans for the Thomson Line, Singapore’s sixth MRT line, were announced last week. “With the expected increase in construction activity, we believe Tat Hong is well-positioned to benefit from a corresponding increase in crane rental rates.”

Any rental-rate or utilization increase goes straight to the bottom line, as a large part of the company’s expenses are depreciation and financing costs on the hire-purchase of its crane assets, it says. “This is exactly what is happening now - both the utilization and rental rates are trending upwards over the medium term and we expect Tat Hong to deliver record profits for FY12-13F.”

It keeps a Buy call with $1.39 fair value. The stock is up 6.4% at $1.24 at 4:12 pm.