Hiap Tong Corporation Ltd. Financial Analysis – Net Profit Decline

   

Business Description

Hiap Tong Corporation Ltd. is primarily involved in the renting of cranes, prime movers, heavy machinery, and equipment. Additionally, the company trades cranes and heavy equipment and supplies labor for container lashing/unlashing, prime mover driving services, and ancillary works. The company’s operations are primarily based in Singapore and Malaysia.

Industry Position and Competitive Landscape

The company operates within the lifting and haulage services industry, which remains competitive due to the tight labor market and higher borrowing costs. The company also provides manpower services, including port services and work train operation services. Hiap Tong’s competitive advantage lies in its comprehensive service offerings and strategic geographical presence in Singapore and Malaysia.

Revenue Streams and Customer Base

Hiap Tong Corporation Ltd. has two main operating segments: lifting and haulage services and manpower services. The company reported a total revenue of \$44.3 million for the six months ended 30 September 2024, with significant contributions from both segments. The revenue from lifting and haulage services increased by 6.8%, driven by the commencement of certain projects in Singapore. The manpower services, particularly work train operations, saw a 39.0% increase in revenue due to higher demand for manpower services for the LTA project.

Financial Statement Analysis

Income Statement

The revenue increased by 2.7% from \$43.2 million in HY2024 to \$44.3 million in HY2025. However, the net profit declined by 24.2% from \$1.83 million to \$1.38 million due to higher costs and reduced other income [[2]].

Balance Sheet

The total assets decreased to \$197.4 million from \$203.7 million as at 31 March 2024, primarily due to depreciation and net disposal of equipment [[3]]. Non-current assets constitute 72.3% of total assets, while current assets slightly decreased due to lower cash and cash equivalents [[3]].

Cash Flow Statement

Net cash from operating activities decreased by \$4.9 million due to net outflow of working capital. The company recorded net cash from investing activities of \$0.9 million, attributed to reduced acquisition of property, plant, and equipment. Net cash used in financing activities decreased by \$1.8 million, driven by higher proceeds from loans and borrowings and lower dividends paid [[7]].

Dividends

No interim dividend has been declared for HY2025. The company paid a cash dividend of \$317,000 in the reported period [[24]].

Key Findings and Recommendations

Strengths

• Increased revenue from both lifting and haulage services and manpower services.
• Reduction in current liabilities due to conversion of trade payables into hire purchase financing.

Risks

• Significant decline in net profit by 24.2%.
• Decreased cash and cash equivalents impacting liquidity.
• Competitive industry landscape and higher borrowing costs.

Recommendations

For Current Shareholders:

Hold the stock. Despite the net profit decline, the company has shown resilience in revenue growth and operational efficiency, which might translate into better financial performance in the future.

For Potential Investors:

Consider a cautious approach. Monitor the company’s performance over the next few quarters to see if efforts to improve profitability materialize before making an investment decision.

Special Activities

The company is planning the redevelopment of the property at 22 Soon Lee Road to fulfill investment requirements under the Offer Letter from Jurong Town Corporation [[23]].

Report Date

The report is for the six months ended 30 September 2024 and was released on 12 November 2024.

Disclaimer

This analysis is based on the provided financial report and should not be considered as financial advice. Investors should conduct their own research or consult with a financial advisor before making investment decisions.