SAC Capital analysts June Yap and Matthias Chan highlight Kim Heng 5G2 ’s strong earnings and recent wins in its June 13 unrated report.
Kim Heng is an established player in providing engineering, procurement, construction, and installation support for the offshore renewable, marine, and oil and gas industries. It has over 50 years of experience, operating primarily in Singapore with two shipyards and is currently serving customers in 25 countries.
The analysts note that Kim Heng has experienced a sharp increase in its FY2023 revenue, improving by 26.7 y-o-y to $101.2 million following the retrofitting and upgrading of vessels from the marine offshore support services.
They add that marine and offshore-related services formed the group’s largest contributor, representing 40.5% of its total revenue. Similarly, gross net profit also increased by 18.4% y-o-y, coming in at $32.8 million.
However, Yap and Chan note that Kim Heng’s profit dropped from $8.6 million to $2.3 million, resulting from inflationary pressures and higher tax expenses incurred alongside increasing administrative expenses and finance costs.
“On more recent wins, the group’s 50%-owned indirect subsidiary, Thaitan International Pte. Ltd, secured a contract for installing pipe conduits using horizontal directional drilling for optical submarine installation from Alcatel Submarine Networks,” say the analysts.
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This win comes in addition to the group securing a shipbuilding contract valued at $10.6 million from TIPC Marine Corporation Ltd as well as partnering with Dyna-Mac to capitalise on opportunities in the floating production, storage and offloading (FPSO) module fabrication sector.
Moving forward, the analysts add that Kim Heng is poised to pivot into renewables following its recent agreement signing between Adira Renewables Pte Ltd, the wholly-owned subsidiary of Kim Heng, in partnership with Soiltech Engineering Co. Ltd. Korea, and an established global offshore windfarm developer in Korea.
Additionally, this strong contract win momentum has been sustained following the group’s win of an award of US$7.8 million ($10.54 million) modification and shipbuilding contract from an established construction company in Taiwan in relation to offshore renewable energy construction projects.
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Kim Heng’s current price-to-book (P/B) stands at 1.0 times which trades favourably compared to its peers which are trading closer to 2.1 times and the Catalist’s current P/B of 3.1 times.
As at 12.55pm, shares in Kim Heng are trading at 0.1 cents lower or down 1.15% at 8.6 cents.
