Review of Singapore Stock – Technics Oil & Gas

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TECHNICS Oil & Gas had sent a request to SGX last week to halt its trading on the exchange after its share price tumbled almost 90% year-to-date from $0.63 to $0.07.

For its latest quarter, TECHNICS reported revenues fell 29% to $14.16 million, net loss of $4.42 million compared to $617,000 profit last year. The revenue dip however was cited as due to the sale of its Vina Offshore Engineering stake last year.

Below is a list of updates with regards to the company

  1. Posted a $6 million loss for first half of its fiscal year 2016 while revenues have fallen by half compared to 4 years ago
  2. Halted trading from January 2016 to February 2016 on news of selling a subsidiary but the talks did not work out in the end
  3. Received 2 trading query from SGX in less than 3 months period. One in the month of May and the other in February.
  4. Landlord Soilbuild Business REIT taken legal action to claim rent charges of $11.8 million on TECHNICS’s premises. The amount has since been disbursed to the REIT.
  5. Founder Robin Ting Yew Sue (resigned as chairman February this year) had his 13.6 million TECHNICS shares force sold by financial institutions for $2.1million in March 2016. Currently he owns 4.74% of the TECHNICS. He owned 10.68% of TECHNICS before the sale.
  6. Founder’s son Deren Ting Tiong Ching (step down as executive director in April this year) has filed a lawsuit against TECHNICS for a $4.9million loan repayment.
    He also sold 14 million shares (6.18% ownership of the company) for $2.8 million. He now owns 0.06% of the TECHNICS compared to 6.18% before the sale.
  7. TECHNICS also lost a $70.5 million contract to build a lifeboat due to a non-fulfilment clause by parties on the contract’s effective date.
  8. Eversendai Corp (Malaysian-listed company controlled by businessman AK Nathan) recently became the biggest shareholder of TECHNICS, owning 29.87% of TECHNICS. This position however was built since 2012 and the latest transaction was dated on early March 2016 when Eversendai bought 10.3% of the TECHNICS.
    Mr Nathan was appointed as executive chairman of TECHNICS on 1st April 2016.

Results for Financial Year 2015

technics oil and gas performance

FY 2015 results
Revenue up 7% to $74.2million
Gross Profit up 20% to $32.0million
Net Profit up $1.1million, up from losses of $7.5million last year
The company’s market capitalisation as of 3rd June 2016 is $16.24 million.

 

TECHNICS order book stands at $126.9 million as of 31st October 2015. If no new contracts were added in from that period till now, TECHNICS current order book will be $56.4 million (deducted the $70.5 million contract it lost).

Bulk of the proceeds ($97 million) TECHNICS received from selling its property (72 Loyang Way) was used to pay down its liabilities. It resulted in a net reduce in total liabilities by $30.3 million. As of 31st March 2016, TECHNICS’s total liability is 62.4% of its total assets. This figure is comparatively higher than at the end of its FY2015 (61.6%) although it is still lower than in FY2014 (65.8%). We expect this figure to go a lot higher after factoring out the amount of money it had paid out to Soilbuild REIT ($11.8 million) and if it were to lose the case against Mr Deren Ting, requiring them to pay back the loan of $4.9 million.

We took out the 2 large sum from TECHNICS’ cash holding (assuming worst case scenario) and its total liabilities immediately rose to 69.5% of total assets with less than $1million cash left over. When that happens, the company’s equity will be worth $44.8 million, above the current market capitalization of $16.24 million.

We do not think the company can reverse its current path of posting a loss for FY2016, neither do we think that a company that is highly leverage is a safe company to invest in.