Background: Technics Oil & Gas is a full-service integrator of compression systems and process modules for the global offshore oil and gas sector. Specifically, it makes modules that are integrated into equipment used in offshore production. The company operates two yards, one each in Singapore and Batam.
Recent development: Technics announced last week that it has secured an EPCC contract worth an estimated $32m from Vietsovpetro for the provisioning of the topside equipments for wellhead satellite platforms in offshore Vietnam. According to management, project planning will commence this month and the platforms are targeted for completion next June.
Key ratios…
Price-to-earnings: 9.0x
Price-to-NTA: 3.4x
Dividend per share / yield: S$0.12 / 13.1%
Net cash/(debt) per share: (S$0.074)
Net gearing ratio: 30.0%
Share price S$0.915
Issued shares (m) 221.773
Market cap (S$m) 202.92
Free float (%) 55.8
Recent fundraising activities Dec 2010: Issuance of 13m new shares @ $1.02 for TDR listing
Financial YE 30 September
Major shareholders Robin Ting (33.2%), David Tay (8.7%)
YTD change +8.4%
52-wk price range S$0.73-1.05
Our view
Repeat orders affirm strong working ties. Including this latest contract win, Technics has been awarded a total of 15 wellhead satellite platform orders by Vietsovpetro. It has completed and delivered 13 projects to date, including the delivery of RC-6 and RC-7 earlier in June.
Strong order momentum. Notably, the latest order came on the heels of another two contract wins worth $8.5m in total. The latter involved a contract engineering job to fabricate a structural module for a Malaysian customer and the construction of a power generation module for FPSO “Petrojarl Cidade Itajal”.
Contract delivery on track. As at 3 August 2011, Technics has an outstanding orderbook of about $103.0m, which should last until end-March next year. More importantly, the company’s customers are oil and gas majors, as well as leading FPSO operators and end-users, which usually have a longer-term perspective on their operational requirements and are not affected by oil price fluctuations. In view of this, the company expects lower risk of order deferment and/or cancellation by its customers.
Fair valuation with attractive yield. Technics recently declared an interim dividend of 3 cents per share for its 3QFY Sep11 results, bringing total DPS to 12 cents for FY Sep11 (no dividend expected in 4Q). This translates to an annualised yield of 13%. The stock currently trades at 9.0x FY Sep11 and 8.1x FY Sep12 PER.
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