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I believe their major profit driver will its chartering business. Unfortunately, not much information is provided about its fleet of 18 vessels (primarily AHTS and chemical/oil tankers) ie charter expiry, time charter rates, counter-parties, loans covenants etc. Without such knowledge, it will be difficult to determine when the time charter will end and whether can it be renewed at a similar rate. Ultimately, the bulk of its profit is derived from vessel chartering so a good comparable would be the two shipping trust (especially FSLT with its tanker exposure).
OCBC recently initiated a report on it -
http://www.ocbcresearch.com/pdf_reports/...07-OIR.pdf
I have not read much about the Company so I can't comment much about it. If there is such a charter profile information, please feel free to point it out to me.
(Not Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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Nick,
You are correct with the chartering business being its major profit driver. Historically ever since FY05, margins for its heavy machinery spare parts business has been around an average of 5.2% and 6.5% for "Design & Manufacturing" and "Trading & Distribution" segments respectively, with the latter being more volatile in its margin distribution.
Chartering business, on the other hand, has achieved an average of 74% from FY08-10. though one thing we have to note is the margin did not consider in the cost of its vessel acquisition. Factoring acquisition through a spread of its non-cash depreciation charges, margin will drop by 15%. Again, factoring acquisition cost neglect the possibility of future gain/loss from its vessel disposal.
I've also read OCBC's report earlier and its description on the offshore O&G business is quite apt - "There is an abundant supply of offshore support vessels operating within the Asian region and unless oil & gas production and demand for these vessels pick up significantly, charter contracts will be hard to come by."
Despite the recent hike in oil prices being a strong driver to push E&P in the industry, there is still a certain oversupply situation which is required to be reduced.
And also, like you have mentioned, not much information has been provided. We are not sure if all 18 vessels have been fully utilised, hence no more room for profit growth.
As such, safe to say, I will pass on this.
*not vested*
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Interesting case ...
Dispute with Otto Marine Limited
Hoe Leong Corporation Ltd (the "Company") wishes to announce that Otto Marine Limited has filed a winding up application as creditor in HC/CWU167/2016 (the "Application") with the Singapore High Court ("the Court") to wind up the Company.
The Court has directed the Application for hearing on 13 September 2016.
The sum claimed against the Company is US$920,000.00 being the balance of a sum of US$1,250,000.00 which was due from the Company to Otto Marine Ltd as of 7 July 2016 under a Deed of Settlement dated 12 February 2014 as amended and varied by a Supplemental Deed dated 3 July 2014, and a Letter of Undertaking dated 23 December 2014 from the Company to Otto Ventures Pte Ltd and Otto Marine Limited.
The Company has been advised by its lawyers that the Application is an abuse of process. The Company has a bona fide defence to the claim for US$920,000.00, on the ground that the claim for the sum of US$1,250,000.00 was settled on 7 July 2016 by and between the Company and Otto Marine Limited on the terms spelt out in the Company’s e-mail to Otto Marine Limited dated 8 July 2016:
"The Company has abided by the terms of settlement and payment of the said sum of US$1,250,000.00 as agreed between the Company and Otto Marine Limited on 7 July 2016 and have delivered to Otto Marine Limited 13 cheques for varying amounts totaling US$1,250,000.00. Otto Marine Limited has accepted the said cheques and has since presented for payment 2 of the said 13 cheques, in affirmation of the said settlement. The next cheque towards settlement of the sum of US$1,250,000.00 is not due until 1 September 2016."
The Company has already accounted for the above amount in its financial statements.
The Company has taken all reasonable care to ensure that the facts stated in this announcement are fair and accurate in all material aspects as at the date hereof and that no material facts have been omitted from this announcement.
The Company will make further announcement as appropriate in due course and on any other material developments as and when necessary
Specuvestor: Asset - Business - Structure.
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More clarification announcement from Hoe Leong Corporation ...
Hoe Leong Corporation Limited (the "Company") refers to the announcement made on 18 August 2016 pertaining to the dispute with Otto Marine Limited.
The Board is of the opinion that the Company has sufficient financial resources to pay the sum claimed of US$920,000 and that the Company can continue on a going concern basis. In arriving at this opinion, the Board has reviewed the Company’s forecasts of financial performance for the financial year ended 31 Dec 2016 and considered the continuing support of its bankers as well as the financial support of its majority shareholder, Hoe Leong Co (Pte) Ltd.
The Company will file a defence against this petition and will make further announcement as appropriate in due course and on any material developments as and when necessary.
Specuvestor: Asset - Business - Structure.
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