Brokers' take: Lim & Tan positive on Tiong Woon amid construction sector recovery; initiates with 'buy'

TIONG Woon Corporation will likely be a key beneficiary of a construction sector recovery, said Lim & Tan Securities, as it initiates coverage on the heavy-lift specialist and service provider with a "buy" call and a target price of S$0.84.

In a report on Wednesday, the research team noted that Singapore's Building and Construction Authority expects the construction sector to recover, with more than S$23 billion worth of contracts awarded.

Tiong Woon will likely benefit from this recovery and also from its delayed contracts from last year, as despite delays in the firm's projects amid the Covid-19 pandemic, overall project schedules likely remain, Lim & Tan said.

It added that Tiong Woon is an overlooked heavy lifting company in the region that can compete effectively with big international firms and top-tiered competitors.

The firm had previously ploughed back its cash into capital expenditures, which helped it provide specialised heavy lifting services for bigger projects, and also participated in mega projects, including the Petronas RAPID projects and Brunei petrochemical island's Hengyi project during its first phase.

Lim & Tan said securing lifting contracts for the second phase of the Hengyi project, which has four times the investment of phase one, will be key to Tiong Woon's performance for the next three years. It predicts the firm will stand a good chance in the tender due to its track record and strong participation in phase one.

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The research team added that Tiong Woon has a low gearing for a construction player, and given its historically strong cash flow, the firm can easily pay off debts and provide higher dividends. It also noted that the stock is trading cheap, since it is a healthy, profitable and extremely cash-generative business.

Shares of Tiong Woon closed at S$0.56 on Wednesday, up 7.5 Singapore cents or 15.46 per cent.