Tat Hong Holdings performance likely to stay weak in FY14

But pickup foreseen by FY15.

Tat Hong’s 1Q14 results suffered mainly from a decline in its Australian operations, which management attributed to election uncertainty, slow down in general construction projects, and temporary relocation of its cranes between projects, reports OCBC.

The research firm said that while the new Coalition government has promised to accelerate infrastructure spending to boost mining investment and increase internal connectivity (i.e. high speed rail), timing of the execution is still unknown and there also remains a time lag to convert improvement in business confidence into actual spending.

"That said, Tat Hong’s performance is likely to stay weak for the remainder of FY14, and a pickup in Australian operations should come by early FY15 instead," said OCBC.

Meanwhile looking at Tat Hong's regional prospects, OCBC said that the firm's other markets – Southeast Asia and Hong Kong – should remain stable in FY14 and provide some cushion for the group.

"In addition, preliminary assessments for construction expenditure in China indicate an increase in spending of between 8-9% for 2014 through to 2017, which will help address concerns over a possible slowdown in the world’s second largest economy," said OCBC.

"Tat Hong continues to enjoy fairly high utilization rates of about 80% and longer lease terms for its tower cranes in China, and this relative stability will also help offset some of the weakness from its Australian business," it added.