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.

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).

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.

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%.

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.

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

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