PEC

[buddy]

Hi I am new to forum & was wondering has anybody has view on PEC. It looks very cheap with no debt & 60% of market cap in cash. It seems to be generating very high ROCe on its core business.

Any comment appreciated regarding management or business

[Nick]

Hi I am new to forum & was wondering has anybody has view on PEC. It looks very cheap with no debt & 60% of market cap in cash. It seems to be generating very high ROCe on its core business.

Any comment appreciated regarding management or business

Ezion would make a poor comparison with PEC since the former is an owner and operator of jack up rigs (liftboats) while the latter is in the O&G engineering business. Perhaps you may wish to study PEC's rival Rotary Engineering which also has a pretty strong cash position. I guess Rotary niche would be the fact that nearly all of its orderbook are from overseas project ?

(Not Vested in any of the 3)

[buddy]

Nick

Here are my numbers. Market cap is 255 mn $. Cash on Balance Sheet is 168 mn $. Lets assume that out of that cash roughly 28 mn cash is required for business so it means the market is valuing the company at 133 mn as I add back Minority interest of 18 mn.

The company has two business : Project work which is like EPC business & maintenance business. Revenue split is 70% & 30% between two businesses. It makes EBDITA of 65 mn which should be split approx. in same ratio (70:30) between both businesses i.e. roughly 45 mn & 20 mn. Mntnc. business is annuity business so lets for argument sake I gave it 6X EV/EBDITA & lets give 3x multiple to its Project Work business (order book has not grown). This means its total value for its core operating business should be 255 mn. This means the value of PEC should be worth at least $ 1.55. Looks to me very good value. There seems to be 3 analyst covering teh company with Target Price of S$ 1.50-1.58. Also if you take out the cash from Balance Sheet - its ROCE is one of the highest in the sector.

[iff]

PEC does have very good fundamental stats.
First year give out 4 cents dividends which is very generous payout.
One thing to note is that this company is listed relatively new, which is more difficult for value investors to analyze.

I didn't really go into details on this company, but I read there was question asked on the IPO proceeds, which is kind of small compared to its profitability.

(not vested)

[mrEngineer]

Hi buddy, PEC has significant revenues in 2010 in Singapore which is to me is quite risky. Unless you know that the current projects by PEC are overseas ones or you are familiar with o&g industry in singapore and aware if they have big projects coming, it may be a drought for o&g firms focusing on local biz for the next few years. The last big project from Shell just ended last year and nothing fascinating since..

[ValueBeliever]

It seems to me that Dyna-mac bid for Dubai Land base project of ADNOC ZADCO module doesnt make sense that its share price is much higher than PEC. On a valuation basis, PEC is trading 3times whilst DMH trades at 17times and it gets even more ridiculous when compared against PEC book value of 79cts which is below its current price? More than 1/2 of it is pure cash!

Guess, PEC future looks more bleak? now that oil price has recovered strongly and that its already invested in UAE, Qatar and Saudi which puts it in strong contact all the major contractor on the ground of action. More Arab spring surprises?

It will be definitely given a pcs of the action - that I have no doubt. Another long wait ahead?

[propertyinvestor]

PEC depends on Shell for business. The CEO is a former shell employee.

[ValueBeliever]

Just wonder what is so good that Dyna Mac got that PEC doesnt have. PEC M&E works is near turnkey state and they are working on refinery standard that is much higher than offshore production platform? The process module is more complex but most probably the margin is not as high now.

Come on PEC clinch a major project before the year end and make it back to where it should be past the 1$?

[mkmk]

http://infopub.sgx.com/FileOpen/PEC_cont...eID=259729

PEC adds nearly S$50m in contracts to orderbook

- Latest wins include mechanical works for two refineries and supply of fabricated steel structures for global projects
- Group remains committed to building up capabilities for long-term growth while growing orderbook and expanding client base

[Stephentoh]

Any buddies vested in this counter? Capital intensive businesss but pretty low D/E ratio for its business, but any explanation for its eroding profitability. Healthy order to book and contracts till 2018.