Beng Kuang Marine on Aug 5 announced its 1HFY2024 ended June results, which saw the group clock in earnings of $8.6 million, turning around from a loss of $854,000 in the same period a year ago. While this was mainly thanks to a one-off gain from a partial land sale amounting to $5.53 million, the group’s revenue did show some promising growth of 88.1% y-o-y to $59.9 million.
The revenue growth was thanks to the group’s infrastructure engineering division, which saw strong growth of 141.7% y-o-y to $50.1 million, accounting for 83.6% of overall revenue. This was mainly due to the strong performance by its 51%-owned subsidiary ASOM.
This growth was partially offset by an 11.5% y-o-y decline in the corrosion prevention division, which generated $8.2 million due to the company's exit from the water distribution business. 1HFY2024 also saw the gross profit margin increase by 9.2 percentage points to 35.5%, which helped gross profit surge by 153.4% to $21.3 million.
“Our progress reflects the turnaround strategy we have been re-engineering since 2021, and our steadfast commitment to strengthening our value propositions and achieving durable results. Guided by our 2.0 business model, together with further targeted business development, we are building a stronger foundation to expand our value propositions and increase our operational scale globally,” says Beng Kuang’s CEO Yong Jiunn Run, who has recently joined the company and initiated a business restructuring.
To reward shareholders, the group had also proposed bonus issue of three year warrants on the basis of three bonus warrants for every 10 existing ordinary shares, where each bonus warrant shall carry the right to subscribe for one new ordinary share at the exercise price of 22 cents during the exercise period.
Following the results announcement, Maybank Securities is keeping its “buy” recommendation on Beng Kuang Marine BEZ , but with a lower target price of 29 cents from 47 cents previously, this was due to the group’s core earnings for 1HFY2024 coming in below expectations due to much higher-than-expected admin expenses, which surged 72% y-o-y to $11 million.
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Despite that, analyst Jarick Seet remains bullish on the counter. “We expect 2H2FY2024 to likely replicate or perform even better than 1HFY2024 due to the robust tailwind in the FPSO sector. However, much higher than expected admin expenses hampered operating margins, but we believe this will improve going forward.”
“While we remain bullish on the FPSO market and ASOM as it recorded a strong performance, the warrants dilution has put a cap on its share price upside for FY2024,” says Seet, while noting that total net proceeds from the warrants issue could amount to $13.02 million.
Seet is cautiously optimistic and will continue to review the group’s cost control measures and core earnings performance going forward and make any necessary adjustments.
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Risks such as economic recession, lower oil price leading in slower O&G activities and rising labour costs have been priced into the call.
As at 12.10pm, shares in Beng Kuang dropped 14.6% for the day to trade at 20 cents.
