YONGMAO: 1H2014 net profit up 92%; year-to-date stock price doubles

Yongmao's tower cranes are used to construct large scale projects such as Macau Studio City, Asia's first leisure resort to integrate television and film production facilities, retail, gaming and hotels. Company photo

YONGMAO HOLDINGS is one S-chip that has not been affected by the recent penny stock sell-off.  The share price of the leading PRC tower crane manufacturer has been rising steadily since the beginning of this year.

Executive director Sun Tian. Company photoFrom less than 10 cents in early January, it has consistently traded at 20 cents or more over the past 3 months.

The resilience of the stock price suggests that investors were anticipating a robust business performance. They were not disappointed.

This week, Yongmao posted a 1HFY2014 (April to September 2013) net profit attributable to shareholders surge of 92.4% year-on-year to Rmb 28.0 million.

Group revenue was up 36.3% at Rmb 490.6 million.  Gross profit margin was maintained at 24.8%.

The following trends helped its earnings growth:

>> Increased urbanization rates in the second and third-tier Chinese cities

>> Chinese government policy to safeguard GDP growth by infrastructure spending

>> Improved brand presence of Yongmao products, such as capture of market share from foreign brand names, especially in large luffing towercranes used for building skyscrapers.

Sales from China were up 47.0% and contributed 71.8% to Group revenue, compared to a contribution of 66.5% in 1HFY2013.

It also exports to more than 70 countries in several continents. Middle East was the best performer with sales up 276.1%.

Yongmao closed at 22.5 cents on Tue. Bloomberg data

“China’s infrastructure demand will remain strong because of its rapid urbanization.

"Faster approvals of building and infrastructure projects led by the government and China's year-on-year GDP rebound point to sustained demand for tower cranes,” said executive director Sun Tian.

Mr Sun is the son of the Group’s founders - executive chairman, Mr Sun Zhao Lin and CEO, Ms Tian Ruo Nan.  The Sun family has interests of 57.4% in Yongmao.

Its second largest shareholder, Chwee Cheng & Sons, is an investment vehicle of Tat Hong managing director Roland Ng and has interests of 23.95%.  Mr Ng is also Yongmao’s non-executive director and deputy Chairman.

Luffing cranes designed and manufactured by Yongmao sell at relatively better margins compared to other types of cranes. They are used at work sites surrounded by tall buildings. Company photoJoint ventures with strategic shareholder Tat Hong, one of the world’s largest crawler crane rental companies, enabled the well-known tower crane manufacturer to successfully enter the crane rental market as well as foray overseas.

During 1HFY2014, it announced the sale and purchase and joint venture for the acquisition of rental companies in Hong Kong and Macau - Eastime Engineering Limited and Eastime Engineering (Macau) Co Ltd.

“Increased construction activities in Southeast Asian markets such as Malaysia, and new markets like Myanmar will also drive demand for tower cranes,” said Mr Sun.

In recent years, it managed to capture 30% of Singapore’s new tower crane market. It also supplies almost 90% of the cranes used to construct nuclear power plants in China.

The Group sells mainly to construction equipment distributors, construction companies and equipment rental companies.

In China, Yongmao’s tower cranes have been used in landmark projects such as China National Opera House in Beijing, Shanghai South Railway Station, Changjiang River Bridge, Fujian LNG Project and Expo 2010 Shanghai.
 
In Singapore, its cranes were used in projects such as Asia Square Tower 1 and 2, South Beach project and various HDB construction projects.

The Group’s cranes have also been used in iconic construction projects overseas.  These include Imperial Wharf and 22 Marsh Wall projects in the UK, AZ St Jan General Hospital in Belgium, Gold Coast University Hospital in Australia, City of Dreams casino project and Studio City project in Macau and Kai Tak Cruise Terminal in Hong Kong.