Fair-Value Report — Tat Hong Equipment Service (2153.HK)

Insider Signal

Verified Snapshot

Sources: stockanalysis.com (July 2, 2026); Investing.com financials; company FY2025/26 annual results announcement (June 12, 2026, HKEX). EBITDA estimated as EBIT (−RMB 57M) plus implied D&A (~RMB 229M). Exchange rate used: 1 CNY ≈ 1.07 HKD.

Business

Tat Hong Equipment Service is the first foreign-owned tower crane service provider established in the PRC (founded 2007, HQ Shanghai). It offers a one-stop model — consultation, technical design, commissioning, construction, and after-sales service — to Tier-1 and Special-Tier EPC contractors. As at March 31, 2026, the Group manages 1,129 tower cranes across 250 projects in progress, with an outstanding contract value of RMB 668.3M and a further 75 projects on hand valued at RMB 148.8M.

The business model is capital-intensive: the crane fleet is owned and depreciated over its useful life, generating revenue from rental (by tonne-metre deployed). Total tonne-metres in use fell 9% YoY in FY2026 (2.85M TM vs 3.14M), consistent with the ongoing China property and construction downturn. The gross margin is thin (9.6% in FY2026) because most revenue-related costs — crane operator wages, maintenance, parts — are recognised in cost of revenue alongside heavy depreciation.

Related-party note: Tat Hong Equipment's EGM in April 2026 approved the "New Yongmao Master Agreement" — a continuing connected transaction whereby the company procures tower cranes from Yongmao Holdings (SGX:BKX), in which Ng San Tiong holds a material interest. This creates a bilateral relationship: Ng benefits from both the crane supplier (Yongmao) and the crane user (Tat Hong Equipment). Pricing of the master agreement must be fair per HKEX rules, but the structure is a standard related-party governance concern for minority shareholders.

Valuation

Method: P/Book (primary) + EV/EBITDA (cross-check)

With two consecutive years of net losses and no near-term path to positive net income, a FCF-DCF is inappropriate. The asset-based approach (P/Book) is the primary anchor. EV/EBITDA serves as a cross-check — EBITDA is positive (RMB ~172M) because the rental business generates cash before the heavy D&A charge, and because operating cash flow (RMB 311M) demonstrates real economic activity. A going-concern flag is NOT raised — the company has positive EBITDA, meaningful operating CF, and a solvent balance sheet — but continued equity erosion from net losses is a genuine risk.

Scenario Analysis (P/Book)

EV/EBITDA Cross-Check

EBITDA used: HKD 184M (RMB 172M × 1.07). Net debt: HKD 1.11B. Shares: 1.165B.

EV/EBITDA Reverse Read: At HKD 0.84, the market values Tat Hong Equipment at 11.4× trailing EBITDA. For a company losing RMB 120M per year with 9% revenue decline, this multiple is generous — equivalent to profitable, growing equipment rental peers. The multiple implies either (a) a rapid EBITDA recovery to the FY2024/25 level (~HKD 232M), or (b) a quick P/B re-rate from 0.78× toward 1.0× book. Neither is assured given sector headwinds. Under a stressed 8× multiple, equity value drops to HKD 0.31/share. At 5× (distress), net debt exceeds asset value and equity is impaired.

Peer Table

Peer table is indicative. Pure-play China tower-crane rental comps are limited. Zoomlion is included for sector reference only — it is not comparable in business model or size. Yongmao estimates from H2 FY2025 results (revenue RMB 416.5M H2 alone, partially from crane sales). Market data as of early July 2026.

The peer set is thin, which is a genuine analytical limitation. Zoomlion's profitable growth (revenue +15%, profit +38% in 2025) contrasts sharply with Tat Hong Equipment's declining rental volumes — underscoring that the downturn is specific to the construction-contractor customer segment rather than the crane industry broadly. Yongmao's revenue growth (driven by mega-cranes for energy sector) also shows that equipment buyers/sellers are doing better than equipment renters to property/residential contractors.

Conclusion

Rating: HOLD. Probability-weighted fair value HKD 0.71. Current price HKD 0.84 (18% above FV). Event price HKD 0.78 (10% above FV).

The insider signal is genuine — Ng San Tiong made a real on-market purchase of ~HKD 7.3M worth of shares at near 52-week lows, two weeks after disclosing a second consecutive year of RMB 120M losses. This warrants analysis, not dismissal.

However, the signal is not sufficient to justify a buy rating at current prices for three reasons:

• EV/EBITDA is not cheap. At 11.4× trailing EBITDA (itself a flattered metric due to high D&A add-back), the market is pricing in recovery. The EV/EBITDA cross-check shows equity value goes to nil at 5-6× — a plausible multiple for a loss-making crane rental company in a multi-year downturn.
• Book value is eroding. Net losses of RMB 120M/year reduce equity by approximately 10% annually. If losses persist, today's 0.78× P/B will look more expensive in two years even if the price doesn't move.
• Ambiguous buyer motivation. At 70.6%, Ng San Tiong can maintain complete corporate control regardless of this purchase. His buying may reflect genuine value conviction at near-lows, or it may serve as a price floor / signal to maintain creditor confidence. The related-party relationship with Yongmao adds another dimension of interest alignment that is not purely in minority shareholders' favor.

The bull case (HKD 1.00) requires China construction volumes to recover materially, losses to narrow, and P/B to re-rate. This is plausible on a 2-3 year view if infrastructure stimulus accelerates. The base case (HKD 0.72) assumes cost control narrows losses but revenues stagnate. The bear case (HKD 0.40) is a prolonged construction downturn with forced asset impairments or debt refinancing at worse terms.

The stock is a reasonable watch-list candidate at HKD 0.70-0.72 (probability-weighted fair value entry, near the 52-week low). At the current HKD 0.84, it is HOLD — the signal is real, but the price has already moved 7.7% from the purchase date and now sits above our probability-weighted fair value.

Key Risks

• China construction extended downturn: Volume (TM in use) fell 9% in FY2026. If property developers continue to deleverage and new construction starts remain subdued, Tat Hong Equipment's rental volumes face additional decline.
• High leverage and refinancing risk: Net debt of HKD 1.11B against equity of HKD 1.27B = net debt/equity 87%. Current liabilities were ~RMB 1.05B, suggesting significant short-term debt. Refinancing risk is real if credit markets tighten or the company posts worsening losses.
• Related-party governance: The Yongmao crane supply agreement is a continuing connected transaction. Terms are set via board approval (with Ng San Tiong abstaining), but the structural conflict of interest persists. Any deterioration in terms (overpaying for cranes from a related supplier) would reduce equity value directly.
• Book value quality: Tower cranes are long-life assets, but their fair market value in a construction downturn may be significantly below carrying value. Any impairment would reduce book value — the primary valuation anchor — sharply and quickly.
• Minority squeeze risk: At 70.6% ownership, any further accumulation toward 75% (HKEX minimum public float threshold) would require the company to reduce the controlling stake or seek a waiver. Conversely, a privatisation at a low premium is possible but is not our base case.
• Share options outstanding: The company has clarified share option capacity in an addendum to its 2025 annual report. Outstanding options represent dilution risk on any share price recovery.
• No dividend: The board did not recommend a final dividend for FY2026. Income investors receive no compensation for holding through the downcycle.

Sources

• Tat Hong Equipment Service FY2025/26 Annual Results announcement — HKEX, June 12, 2026 (ACN Newswire; ITBusinessNet)
• Stock price, market cap, shares outstanding, revenue, net income — stockanalysis.com (2153 HKG), July 2, 2026
• Financial summary (gross profit, operating income, total assets, equity, EBITDA, operating CF) — Investing.com HK:2153, accessed July 3, 2026
• Net debt (cash HKD 158.56M, debt HKD 1.26B) — Alpha Spread / TipRanks statistics, July 2026
• Insider signal candidate data — HKEX DI system, DI reason 1101/1103, filer Ng San Tiong, event date June 26, 2026
• Yongmao Holdings background — ACN Newswire; MarketScreener; Yongmao IR site
• Zoomlion 2025 results — PR Newswire, stockanalysis.com (1157 HKG), July 3, 2026
• HK 10-year government bond yield 3.31% — TradingEconomics, July 2, 2026
• HKEX EGM notice (Yongmao Master Agreement) — HKEX, March 24, 2026