Energy and Resources Oil & Gas
Industry Review 22 August 2014
Oil makes the world go round
In this review of the Energy and Resources sector, we look more specifically at the oil and gas industry, dynamics that drive supply and demand and a brief overview of the companies that occupy the various parts of the value chain of this sector.
Singapore – growing oil and gas hub in the region. There are around 60 companies listed on the SGX involved in the upstream and downstream oil and gas industry. The rig builders – Keppel Corp and Sembcorp Marine are the largest O&G companies in Singapore in terms of market capitalisation and annual revenue. Exploration and Production (E&P) companies have also become more visible in recent years on the back of increased investments and high oil prices. We also look at the players that provide a wide range of supporting services to both local and global companies. And finally, we have a handful of oil and fuel trading companies that make up the last part of the connection to end users.
Ever increasing need for more investment. More than US$1.6 trillion was invested to provide the world with energy in 2013 alone, according to the International Energy Agency. A major part of that figure went into the extraction and production of fossil fuels and investment in related infrastructures. According to the agency’s forecasts, investment is expected to rise to US$2 trillion per year by 2035, bringing the cumulative invested amount to US$48 trillion. Less than half of that amount will be utilised to meet demand growth with the remainder required to offset declining production and to replace aging facilities.
Driven by industrialisation of non-OECD countries. Most of the growth in energy demand over the next twenty years will be driven by non-OECD countries, led by China and India. Energy demand is expected to increase 41% by 2035, according to BP’s Energy Outlook 2035. Half of that growth will come from the industrial sector, driven by the rapid industrialisation in non-OECD countries as they catch-up to developed countries. Growth will also be led by electricity demand from residential, services and agriculture. And finally to a smaller extent, growth will also come from transportation demand.
Asia Pacific to lead production growth. Asia Pacific will provide 47% of the increase in global energy production, according to BP’s Energy Outlook 2035. Fossil fuels – which includes oil, gas and coal - are estimated to make up 81% of the energy production by then, with renewables contributing the rest.
Largest Oil and Gas SGX-Listed companies by market capitalisation
Research Team (+65) 6236-6878
[email protected] www.nracapital.com
Name Keppel Corp Ltd Sembcorp Marine Ltd Yangzijiang Shipbuilding Ezion Holdings Ltd Pacc Offshore Services COSCO Corp Singapore
Price (Local) 10.90 3.94 1.16 2.23 0.99 0.74
MktCap (S$ m) 19,803.5 8,231.4 4,426.0 2,932.7 1,792.7 1,645.8
Actual PER (x) 10.5 14.5 6.0 12.3 13.1 49.6
PBR (x) 2.1 3.5 1.2 3.1 1.3 1.7
ROE (%) 19.5 21.7 18.6 28.6 10.7 2.3
Yield (%) 3.6 2.5 4.3 0.0 NA 0.0
Price YTD (%) (2.6) (11.0) (2.5) 0.5 NA (2.6)
Price 3 Mth (%) 2.3 (1.0) 1.3 2.8 (14.7) 2.8
Price 6 Mth (%) 4.1 (2.7) 1.3 (3.0) NA 3.5
Source: Bloomberg
page 1
Energy and Resources Energy and Resources Industry Overview The oil and gas industry permeates our everyday lives. From transportation to power generation, we all depend on either oil or gas for our needs. There has been increasing attention in recent times on renewable energy sources, tapping on the energy from the sun or the force of the wind. Despite the increased awareness of renewable sources of energy, oil and gas still continue to play a dominant role in our economy for a few more generations to come. Singapore has well positioned herself to be the centre of oil and gas activities in the Asia Pacific region, where growth will largely be driven by emerging countries led by China and India. Singapore as a leading oil trading hub in the region and one of the world’s top export refining centers has been able to attract many oil and gas companies to list on the public exchange here, thus giving investors an opportunity to participate in the growing energy industry. Although not as established as other mature markets such as Australia, Singapore is progressing at a steady pace in attracting increasing attention from global players and awareness locally on the industry. The oil and gas scene here has historically been dominated by the two biggest listed oil and gas related companies – Keppel Corp and Sembcorp Marine, and continues to do so, and are the only companies included in the main benchmark index. The growth in this industry has not been confined alone to players within the industry, other industries such as shipping that have faced a supply glut in recent years, are currently venturing into the oil and gas industry, and proving that this industry still has some energy to burn. Oil and gas are energy commodities whose prices are largely determined by supply and demand. Therefore, an understanding of where demand is coming from will help see where the industry is going. One main key driver of oil consumption is economic growth, where stronger economic growth translates into higher oil consumption. On the other hand, technological advances have allowed better utilisation of resources thus helping to offset part of the strong growth in demand from emerging countries. From the supply perspective, there are various factors that influence the markets, including geopolitical events leading to supply disruptions or economic shocks. Upstream and downstream. The oil and gas industry is generally divided between two major segments – the upstream and downstream segment. The upstream segment is the beginning of the life cycle, where companies are engaged in exploration and production of oil and gas. On the other end is the downstream segment that most people will be familiar with as they involve daily interaction, and they include gas stations and petrochemical products such as plastics and soaps. In between these two segments are a wide variety of players that support the transporting, processing and refining of oil and gas related products. In our report, we mainly refer to documents from two sources that are publicly available and recognised in the industry. The first is International Energy Agency’s publications which include Key World Energy Statistics and World Energy Outlook. The other source is BP, which publishes the annual BP Statistical Review of World Energy and BP Energy Outlook 2035.
page 2
Energy and Resources Energy demand growth The growth drivers will be driven by emerging market energy demand, particularly China and later on, India. According to BP’s Energy Outlook 2035, global energy consumption is expected to rise 41% by 2035 or an average of around 2.2% per year until 2015 and a slower rate of 1.7% per year until 2025 and finally 1.1% per year until 2035. The slower growth in the later years reflects the slowing down of growth in China and increasing energy efficiency in developed countries. Even with the growth of alternative source of energy, specifically renewables, oil will still continue to grow in demand due to existing infrastructures in place and it is estimated that 81% of energy demand will be driven by fossil fuel. Emerging countries and industrialisation main source of energy consumption growth. Half of growth will be driven by demand from Industrials, while the other half will be driven by residential, services, agriculture and the transport sector. Almost 80% of demand growth will be driven by non-OECD countries, with Asia Pacific showing the fastest rate of growth, according to BP’s Energy Outlook 2035. Figure 1 OECD demand remains flat, while emerging countries led by China (left Chart). Growth mainly due to industrialisation and urbanisation, leading to increasing electricity demand (right chart).
Source: BP Statistical Review of World Energy June 2014
Demand outstrips production. For the past 30 years, world consumption has outstripped production. However, even given the deficit, consumption demand is still met by oil made from non-conventional methods (which is not captured in the production estimates by BP). Thus, the stronger growth in demand and widening deficit could partly explain the higher crude oil price of US$100 per barrel levels we have been experiencing in the past few years. If present trends persist, various industry sources indicate that prices will remain within these levels in the next 20 years.
page 3
Energy and Resources Figure 2 Oil Production and Consumption (thousand barrels per day)
100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 Consumption
Production
Source: BP Statistical Review of World Energy June 2014
Consumption driven by developing countries. North America, Western Europe and Japan have historically led world economic growth in the 20th century. Beginning in the 21st century, China and India – two of the world’s largest populations - have seen rapid economic growth as these countries become more industrialised and urbanised. However, growth in China is slowing down as it adjusts to a more balanced growth and future demand is expected to come from other emerging countries, driven by an increasing population and middle class. According to the United Nations Population Division, 97% of total population growth worldwide comes from developing countries. Figure 3 Asia, particularly China and India, catching up with North America and Europe. Gross Domestic Product (GDP)
Source: World Bank
page 4
Energy and Resources Figure 4 Population growth in developing countries accounts for 97% of total population growth worldwide, leaving much more upside to demand.
Source: United Nations Population Division
page 5
Energy and Resources Upstream Exploration and Production, or simply E&P. This segment includes household names including ExxonMobil, BP and Royal Dutch Shell. Although not pure upstream companies, they are actively engaged in exploration and production. As this segment involves a high degree of risk, most of the companies are large companies with the financial strength to support exploration activities, often partnering with national oil companies to share the risks. Success rates for drilling operations can range depending on location and in some frontier places, only 10% of wells explored will be successful. Usually oil wells located nearby existing producing wells have a much higher success rate.
Source: Cairn Energy
Upstream investment just to keep supply stable. According to the IEA’s New Policies Scenario, 80% of investment in the upstream oil and gas sector will be required to offset existing declining fields just to maintain energy supply at today’s current levels.
Source: IEA, World Energy Investment Outlook 2014
Singapore’s upstream sector. Upstream companies listed on the SGX are categorized into three main segments. The first and biggest by market capitalisation are the oil rig builders and ship builders, followed by the E&P companies, then the oilfield services. Oil rig and ship builders build the vessels such as oil rigs and support vessels used in exploration and production activities. Oil rigs are large vessels facilitated to drill wells, extract and process oil and natural gas. The most popular types of oil rigs include jack-ups, semi-submersibles, and drill ships. The largest SGX-listed yards include Keppel Corp, Sembcorp Marine and Yangzijiang Shipbuilding. These yards specialize in building jack-up rigs, where Singapore accounts for 70% of the world’s market.
page 6
Energy and Resources Figure 5 Various types of oil rigs with different depth capabilities, with drill ships, semisubmersibles and jack-up rigs being the more popular options.
Source: Offshore
E&P segment is a more niche area in Singapore’s context considering that it was only in the past decade that exploration activities have started to pick up due to the high oil prices that motivated companies to take the risk and explore for resources. Singapore listed companies’ O&G field assets have largely been located in Asia but recently have included listings that have assets in Europe, Middle East and the US. The largest Singapore listed companies operating in this segment include KrisEnergy, Rex International and RH Petrogas. Oilfield services companies support the E&P companies and rig builders by providing services that includes engineering, chartering of vessels, subsea services and logistic. Companies operating in this space includes Ezion, Ezra and POSH. Figure 6 SGX listed O&G companies (by market capitalization)
7%
Oil Rig Builders and Ship Builders
19%
Oil and Gas Exploration and Production Oilfield Services 74%
Source: SGX, Bloomberg
page 7
Energy and Resources Current Year end
Price (Local)
MktCap (S$ m)
Actual PER (x)
PBR (x)
ROE (%)
Yield (%)
Price YTD (%)
Name SHIPYARDS AND RIG BUILDERS Keppel Corp Ltd Sembcorp Marine Ltd Yangzijiang Shipbuilding Holdi COSCO Corp Singapore Ltd Vard Holdings Ltd Nam Cheong Ltd Dyna-Mac Holdings Ltd Otto Marine Ltd ASL Marine Holdings Ltd Triyards Holdings Ltd Beng Kuang Marine Ltd JES International Holdings Ltd AVIC International Maritime Ho ES Group Holdings Ltd
12/31/2013 12/31/2013 12/31/2013 12/31/2013 12/31/2013 12/31/2013 12/31/2013 12/31/2013 6/30/2013 8/31/2013 12/31/2013 12/31/2013 12/31/2013 12/31/2013
10.90 3.94 1.16 0.74 1.07 0.48 0.40 0.07 0.63 0.73 0.19 0.07 0.10 0.13
19,803.5 8,231.4 4,426.0 1,645.8 1,262.6 1,006.9 392.4 305.6 262.2 215.4 101.0 79.7 28.6 18.5
10.5 14.5 6.0 46.2 14.4 9.7 14.6 5.8 6.5 4.3 15.3 NM 12.0 6.1
2.1 3.5 1.2 1.3 1.3 1.8 2.1 1.0 0.6 1.0 0.6 0.5 0.9 0.6
19.5 21.7 18.6 2.3 10.4 26.9 15.2 5.2 12.0 24.9 7.1 (34.8) 4.5 6.0
3.6 2.5 4.3 1.3 0.0 1.6 5.0 1.1 3.3 3.2 0.0 0.0 NA 1.1
(2.6) (11.0) (2.5) (2.6) 31.3 54.5 (1.3) (24.2) (9.4) 9.8 107.8 (44.1) (24.2) (3.0)
EXPLORATION AND PRODUCTION KrisEnergy Ltd Linc Energy Ltd Rex International Holding Ltd RH PetroGas Ltd Mirach Energy Ltd Ramba Energy Ltd Interra Resources Ltd Loyz Energy Ltd
12/31/2013 6/30/2013 12/31/2013 12/31/2013 12/31/2013 12/31/2013 12/31/2013 6/30/2013
0.78 1.31 0.59 0.79 0.22 0.47 0.35 0.26
817.4 764.6 640.5 576.4 233.6 162.1 156.2 109.9
NM NM NM NM NM NM 38.3 NM
2.2 1.4 2.9 2.0 2.7 3.0 1.9 1.7
(3.4) (14.5) (5.7) (36.8) (12.1) (27.6) 9.4 (5.4)
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(37.8) (14.1) (1.7) 29.8 41.4 (7.8) (15.7) (23.5)
ENGINEERING AND SERVICES Ezion Holdings Ltd Pacc Offshore Services Holding Ezra Holdings Ltd Pacific Radiance Ltd Swissco Holdings Ltd Mermaid Maritime PCL Charisma Energy Services Ltd Civmec Ltd CH Offshore Ltd Falcon Energy Group Ltd Swiber Holdings Ltd AusGroup Ltd Chuan Hup Holdings Ltd KS Energy Ltd Gaylin Holdings Ltd MTQ Corp Ltd Kim Heng Offshore & Marine XMH Holdings Ltd Atlantic Navigation Holdings S Jasper Investments Ltd Sinwa Ltd Viking Offshore and Marine Ltd IEV Holdings Ltd Jaya Holdings Ltd Nordic Group Ltd Hoe Leong Corp Ltd SBI Offshore Ltd KTL Global Ltd Jason Marine Group Ltd
12/31/2013 12/31/2013 8/31/2013 12/31/2013 12/31/2013 9/30/2013 12/31/2013 6/30/2013 6/30/2014 3/31/2014 12/31/2013 6/30/2013 6/30/2014 12/31/2013 3/31/2014 3/31/2014 12/31/2013 4/30/2014 12/31/2013 3/31/2014 12/31/2013 12/31/2013 12/31/2013 6/30/2013 12/31/2013 12/31/2013 12/31/2013 6/30/2013 3/31/2014
2.23 0.99 1.14 1.49 1.08 0.40 0.04 0.76 0.48 0.41 0.51 0.43 0.29 0.50 0.57 1.51 0.26 0.33 0.46 0.03 0.28 0.12 0.28 0.06 0.10 0.13 0.17 0.11 0.22
2,932.7 1,792.7 1,111.0 1,077.7 725.1 558.2 431.2 380.7 338.4 331.1 309.7 278.8 270.9 262.1 247.5 230.1 184.6 142.5 118.6 118.4 92.6 91.7 53.0 48.6 39.6 37.6 31.0 25.1 23.3
12.3 13.1 20.0 15.2 9.4 7.4 42.0 11.7 10.8 3.6 2.6 4.4 12.3 5.9 20.9 10.8 8.4 22.4 7.3 NM 11.9 11.6 NM 0.7 5.5 1.5 22.0 6.9 8.4
3.1 1.3 0.7 1.4 1.2 0.6 18.1 3.8 1.1 0.9 0.7 0.9 0.7 0.8 2.7 1.7 4.3 2.5 1.6 0.5 1.0 0.9 1.8 0.7 1.0 0.5 1.6 0.5 0.9
28.6 10.7 5.4 19.6 18.1 3.5 (1.9) 36.1 10.8 23.5 15.2 5.8 5.8 0.0 16.8 20.0 43.8 20.2 22.9 (10.8) 3.2 7.3 (4.3) 8.9 9.5 33.2 6.7 1.0 14.6
0.0 NA 0.8 NA 1.4 2.3 0.0 0.8 5.5 5.8 0.0 0.0 3.5 0.0 1.4 2.3 2.0 3.0 0.0 0.0 5.5 1.3 0.8 6.9 2.5 NA 1.3 0.0 4.6
0.5 NA (17.5) 67.8 47.7 (19.6) (48.8) (3.2) 12.9 9.5 (20.5) 127.5 11.5 1.0 (5.0) 27.6 NA (4.3) 42.2 (47.2) 37.5 (28.6) (8.2) 118.0 (6.6) (16.1) 28.9 60.0 42.2
Source: Bloomberg
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Energy and Resources Downstream The downstream segment deals with the refining of crude oil and the processing into various different products to be utilised for energy consumption or transport. This segment also includes various activities including the marketing and distribution of such products as jet fuel at airports and gasoline for vehicles. Figure 7 The O&G lifecycle
Source: PetroStrategies
Downstream companies listed on the SGX are involved in the refining, trading and distribution of refined petroleum products that include petrochemicals, plastics, lubricants, pharmaceuticals, gasoline, diesel and jet fuel. Companies that operate in this space include China Aviation Oil, See Hup Seng and CEFC International. Current Year end Name China Aviation Oil Singapore See Hup Seng Ltd CEFC International Ltd Hengyang Petrochemical Logisti Sinostar PEC Holdings Ltd
12/31/2013 12/31/2013 12/31/2013 12/31/2013 12/31/2013
Price (Local) 0.82 0.29 0.03 0.28 0.08
MktCap (S$ m) 709.2 177.7 112.9 57.0 49.3
Actual PER (x) 7.7 12.9 175.2 NM 4.4
PBR (x) 1.4 1.4 146.5 0.7 0.5
ROE (%) 14.3 9.0 109.2 1.5 (5.3)
Yield (%) 1.9 3.0 NA NA NA
Price YTD (%) (5.8) (6.5) (34.7) 7.7 1.3
Source: Bloomberg
Figure 8 China Aviation Oil (Singapore) Corporation's storage facilities in China
Source: China Aviation Oil (Singapore) Corporation
page 9
Energy and Resources World E&P companies From a global view, the oil and gas industry is composed mainly of national oil companies (NOC) and international oil companies (IOC). Whereas in the past, IOCs tend to be more active in exploring opportunities, the global scene has changed in the last decade with more Chinese and Indian NOCs partnering with local and global institutions to develop South American and African oil fields. Regardless of who explores for resources, demand will continue to grow. The largest IOC is Exxon Mobile Corporation, whose market capitalisation of US$421bn is bigger than Singapore’s economy. Other familiar names include Royal Dutch Shell, Chevron, Total and BP. NOCs include Saudi Aramco, Gazprom, PetroChina (Chinese state-owned company that bought over SPC) and National Iranian Oil Co. Most of these global organizations are fully integrated, meaning that they are involved in the full lifecycle of exploration, production, refining and distribution of oil and gas products. On a supporting role to these familiar names are companies that people working in the industry would be more aware of. They include Schlumberger, Baker Hughes, Ensco, Halliburton, Seadrill, Transocean and Noble. These companies provide a range of services from locating hydrocarbons, managing geological data, drilling, well development, logistical support and site abandonment.
Key Risks Significant increase in oil prices. According to data by the US Fed, five of the seven last US recessions were preceded by considerable increases in oil prices. The reason is that high oil prices can dampen demand for other goods in the economy as a result of higher production cost of goods for those using oil or products of oil as an input. Drop in oil prices. At current oil price levels around US$100/barrel, oil and gas exploration and production activities are still feasible to embark on. However, any prolonged drop in oil prices might make many of the current exploration unfeasible and hence affect companies from the shipyards to servicing companies. E&P activities takes time. E&P may take longer periods to turn profitable and may need to rise funding via capital or equity markets to fund further exploration and production. Hence, investors might need to broaden their investing timeframe more than they originally planned. Country regulations. Countries that do not have firm and clear regulations may impact firms’ plans and ultimately investors’ appetite to invest. As a result, in some countries including Indonesia, oil production has tapered off over the past few decades and the country tipped into net importer.
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China Aviation Oil Background
Not Rated Current Price
Ticker: SGX: G92
S$0.815
Fair Value Up / (downside)
na na
China Aviation Oil (Singapore) Corporation Ltd (CAO) is the largest physical jet fuel trader in the Asia Pacific region and the sole supplier of imported jet fuel to China's civil aviation industry. It operates in three segments: Middle Distillates, Other Oil Products, and Investments in Oil-Related Assets. The company is involved in the supply and trading of jet fuel to the international airports in China, as well as markets and supplies aviation fuel to airline companies in Europe, North America, the Asia Pacific, and the Middle East.
Stock Statistics Market cap 52-low 52-high Avg 3m daily vol No of share Current PER Current PBR Dividend yield Free float
S$709.7m S$0.74 S$0.90 0.08m 860.2m 7.8x 1.0x 2.5% 28%
Equity Offering Details - gross proceeds IPO: 12/01 S$0.56 ADDL: 10/04 S$ 1.35
S$81m S$196m
Major Shareholders CNAF BP Investments Asia
Historical Chart
51.3% 20.2%
Incorporated in Singapore in 1993, CAO was listed on the mainboard of the Singapore Exchange Securities Trading Limited since 2001. Its parent company, China National Aviation Fuel Group Corporation (CNAF) is a large State-owned enterprise in China. It is the largest aviation transportation logistics service provider in China, with a diverse portfolio of businesses, comprising aviation fuel distribution, storage and refuelling services at 169 airports in China.
Recent Financial Overview CAO’s 2Q14 revenue grew by 4.4% yoy to US$3.9bn attributable mainly to higher trading volume of other oil products. The total supply and trading volume for jet fuel (-0.7% yoy) and other oil products (+29% yoy) increased by 0.39m tonnes (+9.5% yoy) to 4.5m tonnes. Net profit increased by 32% yoy to US$17.7m mainly due to higher contribution from share of results of associates, Shanghai Pudong International Airport Aviation Fuel Supply Company Ltd.
Outlook The group has made good progress as China’s domestic refinery capacity is increasing amidst the increase in demand for jet fuel. CAO will continue to focus on its core jet supply and trading business globally while expanding its aviation marketing business into more airports outside China. It also entered into a JV contract on 4 Sep 2013 for the establishment of a JV company in Hong Kong known as CNAF Hong Kong Refuelling Limited (CNAF HKRL) through its subsidiary, CAOHK. The Group had invested US$5m which represents a 39% equity interest in CNAF HKRL. CNAF HKRL’s refuelling facilities is currently under construction and will be completed in 2015. Key Financial Data (US$ m, FYE Dec)
2009
2010
2011
2012
2013
3,634.3 22.4 45.2 5.2
5,452.6 19.3 54.7 6.3
9,012.0 26.2 63.4 7.4
14,808.0 27.3 66.2 7.7
15,571.9 30.1 70.2 6.8
Cash and Equivalents Total Current Assets Total Assets Total Current Liabilities Total Liabilities Total Equity Shares Out on Balance Sheet
182.2 599.6 758.7 449.0 449.0 309.7 867.4
58.0 753.9 957.9 607.8 612.7 345.2 867.4
88.1 964.8 1,194.3 786.6 792.9 401.3 860.2
81.1 1,384.4 1,650.3 1,184.2 1,190.4 459.9 860.2
56.3 1,289.9 1,574.9 1,045.1 1,051.3 523.6 1,032.2
Cash From Operations Cash From Investing Cash From Financing
85.2 (45.5) (10.6)
(129.4) (1.0) 6.2
45.7 (2.1) (13.5)
70.6 (37.7) (39.8)
(33.8) (6.7) 15.6
Total Revenues Operating Income Net Income to Common Basic EPS (cents)
Source: Bloomberg
page 11
Jason Marine Group Background
Not Rated Current Price
S$0.22
Fair Value Up / (downside)
na na
Stock Statistics Market cap 52-low 52-high Avg 3m daily vol No of share Current PER Current PBR Dividend yield Free float
S$23.3m S$0.12 S$0.30 0.21m 105.8m 8.4x 0.9x 0.9% 20%
Equity Offering Details - gross proceeds IPO: 09/09 S$0.21
S$3.4m
Major Shareholders Foo Chew Tuck
Historical Chart
Ticker: Catalist:5PF
76.9%
Founded in 1976, Jason Marine started off as a sole-proprietorship providing repair services for marine electronics equipment on board vessels. Since then, the company has transformed into a provider of integrated solutions of communication, navigation and automation systems for the marine and offshore oil & gas industries. Its business activities can be broadly classified as follows: 1) Sale of marine communication, navigation and automation systems 2) Provision of maintenance and support services and 3) Provision of airtime services. Further, the company provides bandwidth airtime for the satellite communication systems used in direct-dial voice, communication, facsimile, data transfer, telex, e-mail, and high-speed Internet connections; and prepaid and value added services. Jason Marine Group Limited provides its products and services in Singapore, the People’s Republic of China, other Southeast Asian countries, and internationally.
Recent Financial Overview Jason’s FY03/14 revenue grew by 32.4% yoy to S$50.2m led by all the business segments. Revenue from sale of goods, rendering of services and airtime services increased by 39%, 14% and 16% yoy, respectively. FY03/14 net profit increased by 438% yoy to S$2.8m due largely to the rise in revenue as the group successfully implemented its re-charting strategy. The decision was taken by the management in FY13 to re-chart its strategy and reposition their businesses. Having realigned its operations into three main divisions, the company was able to rapidly intensify efforts to improve both sales and productivity across the board.
Outlook There remains an uncertainty in the marine and offshore market. The operating environment is expected to remain challenging due to keen competition, shortage of skilled manpower and rising costs. However, the group is cautiously optimistic on the outlook in view of its focused efforts to strengthen its existing business and seek out new opportunities. Key Financial Data (S$ m, FYE Mar)
2010
2011
2012
2013
2014
Total Revenues Operating Income Net Income to Common Basic EPS (cents)
51.5 6.2 4.4 8.6
45.2 1.9 1.2 1.2
44.5 1.5 1.4 1.3
37.9 0.7 0.5 0.5
50.2 2.6 2.8 2.6
12.7 31.4 33.3 11.0 11.1 22.2 106.0
8.7 36.4 39.1 15.6 15.6 23.4 106.0
11.9 31.1 33.8 9.2 9.2 24.6 106.0
13.5 32.3 35.4 10.4 10.5 24.9 106.0
17.0 44.8 48.2 20.7 20.8 27.4 106.0
7.2 (0.5) (1.3)
(5.1) (1.1) 2.1
5.6 0.1 (2.4)
2.0 (0.2) (0.2)
4.5 (0.6) (0.2)
Cash and Equivalents Total Current Assets Total Assets Total Current Liabilities Total Liabilities Total Equity Shares Out on Balance Sheet Cash From Operations Cash From Investing Cash From Financing Source: Bloomberg
page 12
MTQ Corporation Background
Not Rated Current Price
S$1.47
Fair Value Up / (downside)
na na
Stock Statistics Market cap 52-low 52-high Avg 3m daily vol No of share Current PER Current PBR Dividend yield Free float
S$224m S$1.15 S$1.83 0.06m 152.4m 10.2x 2.2x 2.7% 45%
Equity Offering Details - gross proceeds IPO: 04/88 S$0.26 ADDL: 01/99 S$0.535 ADDL: 04/04 S$0.40
S$4m S$6m
Major Shareholders Kuah Kok Kim Maclean Investments Tai Tak Securities Hwa Hong Corp
Historical Chart
Ticker: SGX:M05
24.2% 17.6% 8.4% 5.4%
Founded in 1959, MTQ Corporation Limited was formerly known as Metalock Singapore and changed its name to MTQ Corporation Limited in 2003. MTQ is a premier integrated engineering solutions provider in the region, and specializes in two major business segments: Oilfield Engineering and Engine Systems. The Oilfield Engineering segment is primarily involved in oilfield equipment repairs and rental operations to a wide range of customers in the Oil and Gas industry such as Original Equipment Manufacturer (OEM), drilling contractors, rig owners, oil companies and service companies. MTQ Engineering Pte Ltd is also the authorized repair workshop for OEMs such as Hydril and Cameron. Its wholly owned subsidiary MTQ Engine Systems (Aust) Pty Ltd is one of the largest aftermarket authorized service supplier of turbochargers and diesel fuel injection parts and services in Australia with a nationwide network of nine branches representing world renowned brands such as Bosch, IHI, Garrett, Denso and Schwitzer. The company is based in Singapore.
Recent Financial Overview MTQ’s 1Q15 sales declined by 19% yoy to S$76.7m largely due to the absence of vessel campaign at Neptune Marine Services which had previously boosted revenue. Within the Oilfield Engineering segment, the Singapore business recorded lower sales while the group had a quiet start from the Binder Group. Nevertheless, gross profit margin has improved from 29.7% in 1QFY2014 to 34.0% in 1QFY2015 mainly due to improved margins in Neptune and Bahrain.
Outlook The group remains positive on the immediate outlook for the oil and gas industry they are operating in, especially the Middle East. Management is confident their businesses will continue to do well. Higher sales activity in Bahrain, Singapore and the Binder Group are keys for growth within Oilfield Engineering going forward. The group is conscious of the need to continue to improve the operating performance of the Neptune division and remains committed to growing its oilfield engineering and subsea services businesses.
Key Financial Data (S$ m, FYE Mar)
2010
2011
2012
2013
2014
Total Revenues Operating Income Net Income to Common Basic EPS (cents)
82.0 12.0 12.0 9.1
91.7 13.8 10.6 8.0
128.4 14.2 14.6 10.9
208.7 26.3 15.4 8.8
313.3 32.4 24.2 16.0
21.8 67.1 101.5 22.3 28.1 73.3 132.1
25.1 64.8 132.6 27.7 54.8 77.7 133.5
28.2 80.7 164.0 53.8 77.9 86.1 135.4
41.7 153.7 257.0 67.8 136.3 120.8 150.3
37.4 147.5 271.4 63.8 130.8 140.6 152.4
4.3 (2.9) (3.1)
22.6 (40.2) 21.2
20.8 (31.5) 14.2
21.9 (39.8) 31.5
32.3 (25.9) (9.9)
Cash and Equivalents Total Current Assets Total Assets Total Current Liabilities Total Liabilities Total Equity Shares Out on Balance Sheet Cash From Operations Cash From Investing Cash From Financing Source: Bloomberg
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Kim Heng Offshore & Marine Background
Not Rated Current Price
Ticker: Catalist:5G2
S$0.25
Fair Value Up / (downside)
na na
Formerly known as Namilton Pte Ltd and founded in 1968, Kim Heng Offshore & Marine Holdings is an established integrated offshore and marine value chain services provider. Strategically located in Singapore, the group offers a one-stop comprehensive range of products and services that cater to different stages of the offshore oil and gas value chain from oil exploration to field development and oil production. The company operates in two segments: 1) Offshore Rig Services and Supply Chain Management, and 2) Vessel Sales and Newbuilds.
Stock Statistics Market cap 52-low 52-high Avg 3m daily vol No of share Current PER Current PBR Dividend yield Free float
S$177.5m S$0.23 S$0.35 3.54m 710.0m 8.2x 1.8x 2.0% 40%
The group’s two shipyards are located at 9 Pandan Crescent and 48 Penjuru Road in Singapore. The shipyards, with a combined waterfront of 205 metres, enable the group to carry out a multitude of services, including offshore rig repair, maintenance and refurbishment, fabrication, newbuildings as well as painting and blasting works. It operates a fleet of approximately 50 vessels comprising tugs and barges, as well as accommodation and crane barges. Kim Heng has built its brand over the years and has established relationships with world renowned customers from over 25 countries in the regions of Southeast Asia, USA, Latin America, Australasia, Middle East and Europe.
Recent Financial Overview Equity Offering Details - gross proceeds IPO: 01/14 S$0.25
S$44m
Major Shareholders KH Group Credence Capital
Historical Chart
42.1% 17.6%
Kim Heng’s 2Q14 sales increased by 3% yoy to S$20.1m mainly due to the increase in revenue from the Vessel Sales and Newbuild segment as the group sold two barges. However, gross profit margin dropped from 45.3% for 2Q13 to 30.2% for 2Q14 mainly due to a higher proportion of lower margin projects which the group had undertaken and vessel sales, which derived lower margins in 2014 and the delay in arrival of certain rigs.
Outlook With the increase in the global rig fleet, the group expects more rigs requiring repair, maintenance and ancillary services. Moving forward, the group will continue to assess potential merger and acquisition opportunities. The group believes its current strong cash position allows them to undertake expansion activities and additional projects, which will put the group in good stead to capitalise on the growth in the energy sector. Key Financial Data (S$ m, FYE Dec)
2010
2011
2012
2013
Total Revenues Operating Income Net Income to Common Basic EPS (cents)
80.6 9.8 (9.2) (1.7)
69.4 16.3 18.5 3.4
86.7 22.3 17.3 3.1
84.8 18.6 17.1 3.1
Cash and Equivalents Total Current Assets Total Assets Total Current Liabilities Total Liabilities Total Equity Shares Out on Balance Sheet
0.1 24.3 109.8 65.0 90.9 18.9 550.0
0.2 28.7 96.0 41.8 60.5 35.6 550.0
1.1 26.1 86.8 31.4 43.4 43.4 550.0
3.5 34.2 92.0 24.6 34.5 57.5 550.0
Cash From Operations Cash From Investing Cash From Financing
14.5 1.8 (16.8)
1.0 26.6 (26.4)
21.9 4.1 (26.5)
20.2 4.0 (19.6)
Source: Bloomberg
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Energy and Resources
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