Baker Technology Limited - CIMB Research 2017-02-21: Cash rich, and with a new asset

Baker Technology Limited - CIMB Research 2017-02-21: Cash rich, and with a new asset BAKER TECHNOLOGY LIMITED BTP.SI

Baker Technology Limited - Cash rich, and with a new asset

  • Baker Technology (BTL) provides specialised equipment and services for the rig industry. Its management team includes industry veteran Dr Benety Chang.
  • According to its 2015 annual report, BTL was constructing one liftboat scheduled for completion by 2H16.
  • Net cash position of S$111.7m (83.4% of market cap) as at 9MFY16.
  • Currently trades at 9MFY16 P/BV of 0.61x vs. 2-year (2015-2016) historical average of 0.82x.



Background 

  • Baker Technology Limited (BTL) manufactures and provides specialised equipment and engineering solutions to oil companies and rig builders in Asia Pacific and the Middle East. 
  • It also designs and builds mobile offshore units and critical equipment and components for the offshore marine industry. 
  • Incorporated in 1981, it was listed on SGX-ST Mainboard in 2008. 
  • Its management team includes veteran Dr Benety Chang, whose many accolades include his role as founding shareholder of PPL Shipyard Pte (now a unit of Sembcorp Marine).


BTL’s business not spared the current industry weakness 

  • 9MFY16 revenue fell 59% to S$19.1m (9MFY15: S$46.2m), and it reported S$3.9m net loss (9MFY15: net profit of S$9.1m). 
  • Also, it recently announced that it will report a net loss for 4Q16/FY16 due to impairment of goodwill in a subsidiary besides weak financials due to tough market conditions. Its intangibles of S$9.6m in 9MFY16 includes goodwill of c.S$7.5m for Sea Deep Shipyard (jackup rig component division) and remaining for the vessel design division (estimated at c.S$2.1m).
  • A new liftboat BTL’s 2015 annual report stated that wholly-owned subsidiary BEL Design Pte Ltd (BEL Design) had completed its first liftboat design, the BEL320-4R200S Liftboat, which was fully approved by the American Bureau of Shipping (ABS) for Unrestricted Service.
  • Construction of the liftboat commenced in 2014 and was scheduled to be completed by 2H16.


Sale or own and charter ? 

  • In BTL’s 1H14 results briefing slides, there was mention that it was considering sale or ownership and charter, with or without partners, for the above-mentioned liftboat. 
  • For reference, in Nov-15 Atlantic Navigation announced a US$56m liftboat acquisition from China. Gulf Marine Services, in its 2016 interim results, stated recent average daily charter rates (DCRs) of c.US$37k-69k/day (dependent on vessel size) and most recent reported net margins by liftboat operators (i.e. Ezion and GMS) ranged 13-25%.


Significant cash and no debt 

  • As at 9MFY16 BTL had a cash position of S$111.7m, equivalent to 83.4% of its market cap. 
  • In 2013, it established a subsidiary, BT Investment, focused on exploring business opportunities through acquisitions and strategic alliances. 
  • We believe the current dire market conditions, present ample opportunities for healthy companies to pick up assets or businesses at attractive prices.


9MFY16 P/BV of 0.61x is below historical average 

  • At current share price, BTL trades at a 9MFY16 P/BV of 0.61x, close to 1 s.d. below its 2-year (2015-16) historical mean of 0.63x. 
  • It is also trading below the average P/BV of c.0.77x seen in 1H16 before sector sentiment was negatively hit by Swiber's filing for judicial management in July 2016.


NOT RATED
Target Price: N/A





Cezzane SEE CIMB Research | LIM Siew Khee CIMB Research | http://research.itradecimb.com/ 2017-02-21
CIMB Research SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998



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