Founded in 1968 as the Kim Heng 5G2 Tugboat Co by Tan Eng Hai, father of current executive chairman and CEO Thomas Tan, Kim Heng began as a towage and marine transportation service within Singapore and its surrounding waters.
In the 1980s, Kim Heng embarked on a series of expansion plans, first providing repair and maintenance services to tugs and barges in the marine oil and gas industry before extending its marine transportation to the chartering and towage of vessels and rigs to offshore platforms throughout Southeast Asia.
In 1999, the company moved into its current 34,125 sq m (367,320 sq ft) facility at 9 Pandan Crescent, which enables the storage and maintenance of offshore equipment, as well as shipbuilding, ship repair and fabrication works.
Today, Kim Heng operates far beyond its towing days of old, drawing revenue from two main business segments: the vessel sales and newbuild segment and the offshore rig services and supply chain management segment, which encompass marine offshore support services, chartering and towage, equipment rental and the sale of offshore-related goods.
In FY2023 ended Dec 31, 2023, Kim Heng saw a revenue growth of 27% y-o-y to $101.2 million, largely thanks to an increase of $15.1 million in its vessel sales segment, which profited from the re-selling of retrofitted vessels acquired at attractive prices.
Despite this, earnings fell 79% y-o-y to $1.6 million from FY2022’s $7.4 million.
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CEO Tan explains in an interview with The Edge Singapore: “While our offshore operations are doing quite well, the drop mainly came from a decrease in demand for our crane hire in our marine construction business. This decrease was affected by the construction industry and it pulled down profit because of high operating expense costs involved.”
One example of the drop in demand can be seen in the cancellation of a windfarm project in Vietnam, in which cranes provide essential heavy-lifting.
Originally meant to be a two-year project, the project was delayed and eventually cancelled due to political reasons within the country.
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“If not for this (drop in demand), we could have been very profitable,” says Tan.
To navigate this risk, Tan says Kim Heng “keeps evolving” in identifying new target markets for new infrastructure projects in countries like Japan or South Korea.
He adds: “We are also looking at West Africa, but places like this require high operating expenses, as well as finding the right partner.”
Another reason for the decline in company’s FY2023 earnings is from the costs incurred in converting a vessel for an offshore geotechnical survey offshore for oil and wind farms in South Korea.
Although the contract for the project was signed in January 2023, conversion of the vessel began that October, with operations only slated to begin in March 2025.
New services in a new market
The offshore renewable energy market, in particular, is an area Kim Heng increasingly sees itself in, with the company having diversified its core business into the segment in FY2021.
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From FY2021 to FY2023, developments include the signing of a memorandum of understanding related to cooperation in offshore windfarm cable laying, the winning of US$35 million ($46.4 million) in offshore-related marine spread contracts in Taiwan, and another securing of a US$7.8 million offshore-related modification and shipbuilding contract.
Revenue from Kim Heng’s renewable energy business has also increased, from $9.8 million in FY2022 to $17.7 million in FY2023.
“We started with shallow water cable installations for windfarms and we expanded to provide soil investigation works.
So, we’re leveraging our expertise as a vessel owner to provide new services in a new market and country because we first started in Taiwan in 2019 and now we are in Korea,” says Tan.
He explains that the process of soil investigation is crucial in securing the foundations of windfarms, to ensure the seabed’s strength in holding structural weight as well as suitability for cable laying.
Tan adds that Kim Heng is in Taiwan and South Korea due to the countries’ burgeoning offshore wind power market.
“Every gigawatt of offshore wind power needs an average investment of US$2.5 billion to build the infrastructure required.”
He says: “In 2017, Taiwan initiated more than 10 gigawatts of offshore wind power to be installed by 2035. To date, they have installed just under five. In Korea, they have already issued licences for more than 10 gigawatts and the windfarm developer that we signed with has more than half of this market share.”
Share price not rising
While the company looks to be on an upswing from steady oil prices and investment in the fast-growing renewable energy space, its share price has not reflected the bullish outlook.
Opening on the Singapore Exchange S68 in 2014 at a share price of 25 cents, as at Aug 5, Kim Heng’s shares closed at 8.7 cents, down 16.3 cents or 34.8%.
The CEO attributes this to the company’s “tough past seven years”. Share buy-backs have been conducted and he is hopeful that the share price “will rise as soon as possible” on the back of continued revenue growth and profitability.
Tan’s optimism is not unfounded.
SAC Capital analysts June Yap and Matthias Chan highlighted Kim Heng’s strong earnings and recent wins in a June 13 unrated report, noting the strength of its marine and offshore-related services forming 40.5% of the FY2023’s total revenue, the securing of a shipbuilding contract valued at $10.6 million from TIPC Marine Corp, as well as a partnership with Dyna-Mac to capitalise on opportunities in the floating production, storage and offloading module fabrication sector.
He concludes: “In many ways, we actually don’t bother competing with other players, rather we focus on doing better every day. You can never really imitate and outdo someone’s attributes, so we stay ahead by building our own capabilities and strength.”
