UOB Kay Hian: Tiong Woon is an "undervalued service provider to the O&G industry"
Analyst: Loke Chunying
Providing a comprehensive set of project management services, from the planning and design of an integrated lifting and haulage service to the installation of dangerous Oil and Gas (O&G) structures (eg oil rigs), Tiong Woon plays an integral role in supporting its customers in the O&G industry.
• Serving a defensive niche. Deriving 70-80% of its revenue from the O&G industry, Tiong Woon’s earnings are relatively more resilient as these service contracts are longer term in nature and can be recurring.
Safety issues pertaining to the O&G industry also create high barriers to entry to the industry.
However, we note the recent price strengthening in its locally listed peers of between 16.7%-40.7%, suggesting a possible re-rating could be on the cards, as Tiong Woon plays catch up to its peers.
Serving primarily the Oil & Gas (O&G) industry, Tiong Woon is an integral crane operator for oil majors in an industry that has high barriers to entry due to safety concerns.
At 0.64x P/B, Tiong Woon is trading at a 23% discount to its local peers average P/B of 0.83x, offering value investors a huge margin of safety.
The ability to consistently record strong gains from disposal of equipment suggests a possible understatement in fair value of assets, making valuation even more compelling.
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