TAT Hong Holdngs Analysis Part 1 (Management)

From today's post onwards, I will attempt to write down my analysis process that I have done prior to the purchasing any stocks. Starting off from Tat Hong, the main reason for choosing it was because I wanted to have an exposure to the construction industry and at then, I forsee a strong demand of crane in the future due to the rapid development of infrastructure locally and globally. I have checked up the sgx market and realised there are only 2 companies in the crane business which are Tiong Woon and Tat Hong.. After doing a 10 minutes test* on both companies, I realised Tat Hong has a competitve edge over Tiong Woon hence I made a decision to do a detailed examination on Tat Hong...

Some background informaton of Tat Hong
The group is principally involved in the rental and sale of cranes and the sale of spare parts for cranes. Apart from cranes, the group is also involved in the rental and sale of other ancillary heavy equipment such as excavators, bulldozers, earth-moving equipment, foundation equipment, piling rigs and generators.

I will first analyze the company's management. It is not really an easy task attempting to analyze a company management but the following pointers can be used as a rough guideline .

1. Does a majoritiy of the board of directiors comprimised of indepent members
The board comprises of ten members, consisting of 5 executive directors, one non-executive non- independent director and four non-executive directors who are also independent from management. (Passed)

2. Is the Chariman of the board also the CEO or a former CEO of the firm
No. (Passed)

3. Are the boards earning an excessive amount of remuneration
No. The boards are paid at a decent amount despite the company having a good performance for the year (Passed)

4. Is the Board of Directors Stacked with Management's Family Members
Yes. All 3 directors are brothers of the MD.. This is hardly a good thing because if they are closely related to the top management, they may not be as hard-nosed when questioning the management's action as it could be. (Failed)

5. Do executives have substantial holders of the company stock
Yes. Mr Ng San Thiong and his brothers are holding a total of 11% of the company stock and CHWEE CHENG & SONGS PTE, which they are related to, holds 42% of the company. (Passed)

6. Length of tenure
It is always preferable to look for solid stable management that stick with their companies for long term and Most of the board members have been with Tat Hong for a relatively long time (10 years odd). (Passed)

7. Performance
They have increasing ROE and ROAs over the years which is not driven by excessive leverage. The company outstanding shares have not been increased substantially which is a positive thing because a agressive approach to issuance of equity will dillute your stake.. (Passed)

8. Strategic decisions
Has management made decisions that will give the film flexibilty in the future which includes simple decision like issuing equites when stock price is high , buy back stocks when price is low. (Unknown)

Rating (Company's management) : 4/5
Although the board are stacked with Management's family members which may not be a good thing but the management has proved their competence in the recent years by earning astronomical profits and making good strategic decisions. Futhermore, one of the most important criteria in analysising a management is to look for solid managements that stick with their company for the long time and they have fulfilled the criteria.