" Growing deployment of FPSO vessels in ultra-deep waters

Based on depth, the industry is segmented into ultra-deep, deep, and shallow. The ultra-deep depth segment is projected to grow at a rate of more than 10% through 2028. This growth is attributed to the rising installation of new FPSO (Floating Production Storage and Offloading) vessels in ultra-deep waters to sustain production levels from complex wells."

https://finance.yahoo.com/news/umbilical-market-revenue-cross-usd-071000929.html?guccounter=1& guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8& guce_referrer_sig=AQAAAHY1UzSkmWDxP2cXtYqfyMs53E5mY_sZb2ZjJ2B2BSsr7svLHbyAVEWCCETEM8_73ZG95K-lmSAYR5xNPzza4fICWg-z9p0iTxAE-Iq6zwR0oJ4T2Hhybis8tT3ACGOSbCnWodhnKgXfFxNUYKtRFhXXKIQXF1m5iRST-fm8CQJz

Snippets: Beng Kuang Marine Ltd (BEZ)
 

Not Vested in Dyna-Mac and BEZ at time of writing.

 

Since April 25th, the share price of Dyna-Mac has increased by about 100%. According to the article, this is most likely a record high net book order of S$641.1 million for floating production, storage, and offloading vessel topsides modules (FPSO), with deliveries extending through 2024.

 

This is related to the oil supply scarcity > resulting to an increase in oil prices > increasing the demand for oil exploration/storage/transportation > leading to higher demand for FPSO.

 

This prompted me to conduct research on the FPSO industry, which led me to Beng Kuang Marine (BEZ), whose share price has been declining instead.

 

This made me wonder if this is an opportunity?

 

As quoted from the latest press release, BEZ has four key business divisions as follows:

 

1. Infrastructure Engineering (&ldquo IE&rdquo ) &ndash Providing a spectrum of turnkey engineering services from planning and project management to implementation involving procurement, fabrication, corrosion prevention, testing, installation and pre-commissioning of steel work modules and structures

2. Corrosion Prevention (&ldquo CP&rdquo ) &ndash Providing corrosion prevention services in several established shipyards in Singapore and Batam, Indonesia

3. Supply and Distribution (&ldquo SD&rdquo ) &ndash Providing a variety of marine and industrial hardware, tools and equipment as well as consumables under its house brands like MASTER, MULTI-FLEX,   WELL and SPLASH

4. Shipping (&ldquo SH&rdquo ) &ndash Operating two livestock vessels and two Indonesian-flagged assist tugs

 

BEZ Financials Updates

 

Revenue Breakdown

 

BEZ' s IE business division, led by its 51 percent-owned subsidiary, Asian Sealand Offshore and Marine Pte Ltd, was the key revenue contributor in 1Q2022, while the Group' s SH business division contributed no revenue because both livestock vessels were taken off charter during 1Q2022.

 

Furthermore, as of 31 March 2022, BKM' s IE order book was at S$15.5 million, of which S$10.5 million was attributable to on-site vessel repair and maintenance solutions to operating floating assets such as FPSO and FSO vessels.

My Opinion

 

According to the financials, BEZ appears to be on a turnaround driven by its IE business division. Despite the absence of revenue from SH, it reported stronger revenue, as well as better gross profit and EBITDA.

 

Furthermore, its IE business is different from Dyna-Mac. BEZ focuses on repairs and maintenance, rather than building of FPSOs.

 

So this seems like an opportunity.

 

More FPSOs will be purchased for repair and maintenance in order to improve operational efficiency. Furthermore, with more FPSO being built around the world in the future, there will undoubtedly be more FPSO due for repairs as well.

 

We should also keep in mind that BEZ also has a CP segment that complements the IE business and offers consumers one-stop repair and maintenance services for their FPSO and FSO.

 

&bull The Group&rsquo s IE business division was the key revenue driver in 1Q2022 with strong revenue growth of 83.9%, while there was no revenue contribution from Group&rsquo s SH business division as both of the Group&rsquo s livestock vessels are still taken off charter during 1Q2022 and the Group is undertaking a strategic review of the livestock vessel business

 

&bull The Group&rsquo s IE order book stood at S$15.5. million as at 31 March 2022, of which S$10.5 million was attributed to ASOM that provides specialised on-site vessel repair and maintenance solutions to operating floating asset, such as FPSO and FSO vessels 

 

&bull Net cash inflow generated from operating activities was S$1.87 million in 1Q2022 &bull With a substantial amount of fixed assets in the balance sheet, the Group registered a depreciation expense (non-cash component) of S$1.90 million in 1Q2022 

 

&bull Prioritising costs minimisation and deleveraging initiatives, while focusing on monetising fixed assets and high-potential business segments to create new growth catalysts 

 

Beng Kuang Marine Limited (&ldquo 明 光 集 团 &rdquo or the &ldquo Company&rdquo , and together with its subsidiaries, the &ldquo Beng Kuang Group&rdquo ), is pleased to share its financial highlights for the first quarter ended 31 March 2022 (&ldquo 1Q2022&rdquo ).

 

Striving to be the &ldquo Preferred Partner&rdquo in providing total solutions for the offshore and marine industries, the Group has four key business divisions as follows:

 

1. Infrastructure Engineering (&ldquo IE&rdquo ) &ndash Providing a spectrum of turnkey engineering services from planning and project management to implementation involving procurement, fabrication, corrosion prevention, testing, installation and pre-commissioning of steel work modules and structures

 

2. Corrosion Prevention (&ldquo CP&rdquo ) &ndash Providing corrosion prevention services in several established shipyards in Singapore and Batam, Indonesia

 

3. Supply and Distribution (&ldquo SD&rdquo ) &ndash Providing a variety of marine and industrial hardware, tools and equipment as well as consumables under its house brands like MASTER, MULTI-FLEX, WELL and SPLASH

 

4. Shipping (&ldquo SH&rdquo ) &ndash Operating two livestock vessels and two Indonesian-flagged assist tugs

 

Revenue increased to S$14.37 million in 1Q2022, representing a growth of 14.4% as compared to 1Q2021: The Group&rsquo s IE business division continued its strong performance with higher business volume in 1Q2022, where IE&rsquo s revenue surged by 83.9% or S$4.47 million, from S$5.34 million in 1Q2021 to S$9.81 million in 1Q2022.

 

With the IE division, the Group&rsquo s 51%-owned subsidiary, Asian Sealand Offshore and Marine Pte Ltd (&ldquo ASOM&rdquo ), was the main revenue contributor with S$4.7 million or 48% of IE&rsquo s 1Q2022 sales as a result of higher business volume.

 

Specialising in asset integrity solutions for operating floating assets such as Floating Production Storage and Offloading vessels and Floating Storage and Offloading vessels, among others, ASOM has established itself as a proficient &ldquo one-stop&rdquo offshore in-situ turnkey solutions provider in optimising and extending the life of such operating floating assets.

As a service-centric business, revenue contribution from ASOM has been growing progressively over the past few years and as at 31 March 2022, ASOM has an order book of S$10.5 million and approximately 5.0 million in the pipeline.

 

In addition, the Group&rsquo s other subsidiaries under IE have performed better for 1Q2022 as compared to 1Q2021, where new marine cranes supply orders have contributed to additional revenue following the Group&rsquo s new marketing efforts in the Middle East and India markets. there were more fabrication work orders for its Batam yard due a recent uptrend in outsourcing manpower-intensive projects by established shipyard customers in Singapore to neighbouring countries to reduce the dependency on foreign workers. The Group owns and operate a waterfront fabrication yard in Batam, Indonesia with a land size of 32 hectares. In total, the IE business division (including ASOM) has an order book of S$15.5 million as at 31 March 2022.

 

On its CP business division, the Group continues to proactively build up its order book and revenue recognition can start once the relevant works commenced. Revenue from the Group&rsquo s CP decreased by 26.4% or S$1.34 million from S$5.07 million in 1Q2021 to S$3.73 million in 1Q2022 as there was a short-term ad-hoc project in 1Q2021.

 

Revenue from the Group&rsquo s SD declined S$0.19 million to S$0.82 million in 1Q2022 as compared to S$1.01 million in 1Q2021. The Group&rsquo s SD continue to undertake a key role within the Group&rsquo s business model, serving as its internal procurement arm to support the rest of the Group&rsquo s business units to manage the operating costs of consumables.

There was no revenue contribution from the Group&rsquo s SH in 1Q2022 as both of the Group&rsquo s livestock vessels continue to be off charter. The first livestock vessels was taken off charter since October 2020 due to an accident and it is currently docked on our Batam waterfront yard for upgrading and maintenance. The second livestock vessel was taken off charter as it was detained on 7 October 2021 by the Indonesia Navy for anchoring at unauthorised area but it has been released in November 2021 and it is back at the Group&rsquo s Batam yard for maintenance. Given the current circumstances, the management is undertaking a strategic review of the livestock vessel business.

 

Net cash of S$1.87 million generated from operating activities during 1Q2022: With a substantial amount of fixed assets in the balance sheet, the Group registered a depreciation expense (non-cash component) of S$1.90 million in 1Q2022. Reflecting the adverse performance of the livestock carrier

business activities, the Group recognised an impairment charge of S$7.54 million in FY2021.

 

After adjusting for finance expense, depreciation and amortisation of property, plant and equipment and intangible assets, and excluding other gains, the Group recorded an adjusted EBITDA of S$1.60 million in 1Q2022 as compared to the Group&rsquo s adjusted EBITDA of S$0.73 million in 1Q2021.

 

Mr. Yong Jiunn Run, Chief Executive Officer of Beng Kuang Group, said: &ldquo We have strong momentum as we enter 2022 and we remain focused on high-potential business segments and new growth catalysts.

 

Looking ahead, we also continue to explore initiatives to monetise our fixed assets and undertake deleveraging initiatives.&rdquo