Tiong Woon reaches for regional growth to build on pandemic momentum

IT has been a fruitful few years for Tiong Woon Corp . While most in the construction industry have seen muted activity, especially during the pandemic, the crane specialist has been on a roll.

Profit has grown more than tenfold in the past six years. And the company’s chief executive officer Michael Ang believes there is more headroom for growth, particularly in key regional markets outside Singapore. 

Its winning formula: keep your head down and focus on your strengths. 

The labour crunch during the pandemic was challenging for Tiong Woon. “There was a deep slowdown in (construction projects) since many sites in Singapore were shut down due to labour shortages,” said Ang. “Our tower crane segment was pretty slow.” 

Restrictions during the pandemic also made operations more difficult; a leaner workforce meant that projects were completed more slowly, Ang said. 

It was then that Tiong Woon started leveraging its niche expertise to enhance its competitiveness.

This included concentrating on medium-duty cranes with a load capacity of up to 600 tonnes. These hefty cranes are more specialised than mass market ones, which have a load capacity of up to 100 tonnes and are more easily accessible. 

Operators of these cranes therefore need a good track record and know-how in handling them, especially since the equipment is expensive, critical in projects, and takes a long time to manufacture, Ang said. 

Safety requirements for such heavy equipment are more stringent too, he noted. But that was not an issue for Tiong Woon. “Our guys have been lifting loads, big or small, for so many years. This is our bread and butter.” 

While managing operating costs and business risks, Ang said, the group prioritised “adequate liquidity” and a “strong cash flow”.

The strategy proved successful. 

Profit more than doubled to S$7.6 million in 2020 – when the pandemic first set in – from S$2.9 million the year before.

The group’s earnings more than doubled again through the pandemic, to S$15.7 million for the latest FY2023 ended June.

Ang attributed much of the growth to success in the Singapore market, which recovered relatively quickly from the pandemic. The city-state was responsible for around 77 per cent of total revenue in the latest financial year.

Reaching for overseas growth

Although recovery in the crane specialist’s overseas operations has been more subdued, Ang is confident that there will be more growth opportunities in the coming few years. This is especially so in key markets such as India and Saudi Arabia, he said. 

Tiong Woon continues to receive “strong customer enquiries” for crane services in these markets – particularly in the construction, oil and gas, petrochemical and infrastructure sectors – amid a still “strong project pipeline”, he said.

In India, for instance, Tiong Woon was recently awarded two major contracts to provide heavy lifting services at sites such as a fertiliser plant. 

In Saudi Arabia, the group currently provides heavy lifting services at around four “high-profile” sites, including a refinery site. There are other sites that are contracted on an ad-hoc basis.

There is also talk about The Line, a car-free linear city planned within Saudi Arabia’s US$500 billion mega-development project in Neom. Plans include an industrial city and a mountain sky resort. 

“They are still working on the foundation (of the project), but we hope to participate in it since we already have a foothold there,” said Ang. “Depending on how these major projects take shape and the timeline for it, the Saudi market could be quite robust for us.” 

On the home front, Ang highlighted that there is a healthy pipeline of potential projects as construction demand rebounds. “The Housing and Development Board (HDB) is churning out more units to meet demand. That’s an area that we’re quite competitive in, so we should have several projects coming up in the next one to two years.” 

Building its reputation

In an Oct 25 report, Lim & Tan Securities analysts also noted that in the past few years, Tiong Woon has beaten international heavyweights, such as Mammoet and Sarens, to win contracts. 

“The regions that Tiong Woon operates in are facing tailwinds from the higher construction demand post-Covid, higher oil prices and final investment decisions that were not present since 2014 (when oil prices crashed),” Lim & Tan said.

Even with record high profits, the analysts believe that Tiong Woon is “far from the cycle peak” and is trading at “distressed valuations”.

The analysts added: “The time for a sector rating 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.”

Still, some challenges lie on the horizon. 

Finance costs, for instance, jumped 42.8 per cent to nearly S$4 million in FY2023, from S$2.8 million in the previous year. This was mainly due to the higher cost of borrowing, and could prove an obstacle should the US Federal Reserve raise interest rates yet again, said Ang. 

There are also geopolitical tensions, growing inflationary pressures and concerns about global economic growth, which may adversely affect Tiong Woon. 

Nonetheless, Ang remains optimistic about the group’s prospects.  

To protect itself, Tiong Woon is now more selective in the projects it takes on, stepping up its credit assessment of potential clients, he said. 

It is also crucial for the group to maintain a strong cash flow since interest rates are unlikely to soften any time soon, he said. 

Ang highlighted that Tiong Woon will continue focusing on its core capabilities to strengthen its competitive edge and provide “high quality” solutions to clients. “Customers want a partner that they can trust,” he said. 

The group’s positioning as a “prominent one-stop integrated heavy-lift specialist and service provider” also means that it is well-placed to benefit from strong demand in the coming years, both in Singapore and abroad, he added.