2 culprits behind Tat Hong's possible earnings slowdown

Crawler crane utilisation rate slashed to 73%.

According to DBS, it sees two potential downside risks to Tat Hong's earnings for the coming quarter in weaker AUD and slower mining and infrastructure spending in Australia. 2H13 revenues from Australia fell 12% y-o-y, affected by a slowdown in mining and infrastructure spending. 

DBS noted that these could result in slower equipment sales/rental and translation losses for 1Q14F.

Here's more:

Expect slower equipment sales, general equipment and crane rental. The outlook for mining in Australia will likely remain weak with infrastructure spending expected to slow down over the next two quarters.

We now expect less aggressive growth in equipment sales, and general equipment and crane rental business. The AUD has also depreciated 9% against the SGD, which could result in translation losses.

Cut FY14F/FY15F earnings by 20%21%. Premised on the above, Australia will potentially drag earnings growth. For FY14F, we lowered crawler crane utilisation rate from 77% to 73% and rental rates by 7% to account for slower rentals.

We also reduced equipment sales revenue growth from 3% to 1% and general equipment rental income growth from 9% to -13%. In addition, we factored in S$5.5m impact from a weaker AUD against the SGD in 1QFY14F.