Valuation Case Study on Technics Oil & Gas

Transcription

1 Valuation Case Study on Technics Oil & Gas

2 Disclaimer and Declaration The objective of the presentation is for educational purposes. The full content of the presentation is for illustration purposes only and should not be used as investment recommendations. AB Maximus and its presenters are not responsible for all investment activities conducted by the participants and cannot be held liable for any investment loss. The company and presenters may have personal interest in the particular shares presented.

3 Agenda 1 Company Background 2 Industry Analysis 3 Valuation 4 Risk

4 Company Background Technic Oil & Gas is in the design and fabrication of process modules and equipment that are integrated to form production and storage facilities for O&G* exploration and production *Oil & Gas Source: Company s Annual Report 2012

5 Company Background Drill by Jack-ups, Sub or Drillship Supplies provided by AHTS, PSV* etc Drill mud to cool bit Separation of mud from sand Cement opening with well cap Starting with natural pressure for flow Water/Gas Injection to create artificial lift Seismic data to locate oil Need drilling to confirm FPSO^ deployed to process oil, gas and water Water returned to ocean ^Floating Production Storage Offload *Anchor Handling Tug Supply Platform Support Vessel

6 Modules Source: Company s Annual Report 2012 Company Background *

7 Company Background Source: Company s Annual Report 2012

8 Source: Company s Annual Report 2012 Company Background Reputable Customer Base

9 Source: Company s Annual Report 2012 Company Background Global Reached

10 Source: Company s Annual Report 2012 Company Background Revenue by Segment (FY 2012) 17% 44% 39% EPCC CE PS EPCC and CE made up 83%

11 Source: Company s Annual Report 2012 Company Background Revenue by Geography (FY 2012) 52% 22% 26% Singapore Asean ex Singapore Others Mainly in Asean

12 New Orders Company Background Orders slowing down Source: Company Data and SGX

13 Company Background Potential synergy with Eversendai Subcontracting of heavy jacket fabrication Presence in Malaysia, tapping into Petronas capex Strong business contact in Middle East Acquisition of Vietnam yard (VOFE*) Potential orders from Chevron, which has a 50-fixedplatform investment plan there over the next 10 years *Vietnam Offshore Fabrication & Engineering Co Source: Company Data and SGX

14 Industry Analysis Asia expected increased economic growth in 2013 To reduce dependence on O&G imports Inclined to meet domestic demand from within their borders Gaining prominence for O&G exploration and drilling activities Expected 2 nd highest investor Source: Infield Systems Asia Oil & Gas Market Report to 2017

15 Industry Analysis IOC s and Independents likely to increase market share in region Global backlog for floating platform systems is at record high 30 deepwater gas fields are expected to come on-stream compared to just 9 deepwater oil field developments APAC in strong position to become a new hub for global gas development over 5 years *International Oil Companies Source: Infield Systems Asia Oil & Gas Market Report to 2017

16 Industry Analysis Various key players announced plans to increase CAPEX over the next few years BP Plc boost US$27b ( ) from US$19.1 in 2011 Indonesia s Pertamina boost 15% (US$6.7b) in 2013 Malaysia s Petronas expected to invest US$59b over next 5 years to position as regional O&G hub O&G CAPEX on the rise Source: Company s Annual Report 2012

17 Valuation Methodology Discounted Free Cashflow to Firm (FCFF)* Price to Earnings Ratio (PE) Dividends Yield * Project the future FCFF from business and discount to present value

18 Valuation Assumption Norr Offshore Group IPO before 2014 High ( ) Steady CFO / FCFF projection $ mil F 2014F 2015F Revenue $129 $150 $112 $126 $138 CFO + INT(1-Tax) -$9 -$2 $20 $21 $23 Less: DFC $10 $10 $10 FCFF* $10 $11 $13 *FCFF = CFO + Interest(1-Tax) DFixed Capital

19 Valuation Risk Free Rate 2.5% Market Required Return 10.0% Risk Premium 2.0% Beta 0.3 Cost of Equity (CAPM) 6.8% Cost of Debt 2.5% WACC* 6.0% *Debt/Equity = 21.36%

20 Valuation 2013F 2014F 2015F FCFF $10 $11 $13 Terminal Value (FCFF2015/r) $280 FCFF $10 $11 $293 NPV $266 Minus Debt $48 Add Cash $29 Less Minorities $2 FCFF due to share holders $245 no. of shares (mil) 207 Fair Value per Share $1.18

21 Valuation FCFF Valuation Fair Value per share (est. at 1 Jan 2013) Current market value per share (as at 18 Jan 2013) $1.18 $1.035

22 Valuation (P/E Comparison) Company P/E Dyna-Mac Hldgs (DMHL) 16.05x ASL Marine (ASL) 8.59x Technic Oil & Gas (TGH) 10.64x Baker Technology (BTL) 3.02x PEC (PEC) 14.69x Hiap Seng (HSE) 13.12x MTQ Corp (MTQ) 6.70x Average P/E 10.40x Est. Forward EPS for TGH $0.10 Fair Value of Technic Oil & Gas using P/E $1.04 P/E fair compared with other industry Source: bloomberg.com

23 Valuation (Dividend Yield) cents Dividend per share Earning per share Dividend Payout 64% 89% 124% 82% Dividend Yield based on latest dividend and current price = $0.08 / $1.035 = 7.7% Please note that company is not obliged to give dividends!

24 Source: bloomberg.com Trading Data 52 Weeks Trading Range $ $1.065 Avg Volume (3 mths) 223,000 Market Cap $232 mil

25 Main Risks Ability to secure new contracts A third of revenue is derived from 1 customer Credit Risk on Receivables Default Risk - Medium Current ratio = 1.07x Interest coverage = 29x D/E ratio = 0.93 Loans maturing this year = S$47 mil Cash = S$29 mil END