Technics Oil & Gas

Kim Eng on 16 Apr 2012

Background: Technics Oil & Gas is a full-service integrator of compression systems and process modules for the global offshore oil and gas sector. It designs and fabricates modules that are integrated to form the operating systems in offshore production. The company operates a yard each in Singapore and Batam. Set up in 1990, it was listed since April 2003 and upgraded to the main board in January 2008.

Recent developments: Technics reported a strong set of results for 1HFY Sep12, with NPAT growing by 60% YoY to $12.5m. The second quarter outshone the first, accounting for $8.3m of 1HFY Sep12 NPAT.

Increased E&P activities a boon. E&P spending worldwide is expected to increase by about 10% YoY in 2012, which should provide Technics with more contract opportunities. The company has an outstanding orderbook of about $95.5m and is vying for projects in the region worth about $260m.

Spin off subsidiaries for better valuation. Technics intends to spin off two of its subsidiaries, Norr Systems and Wecom Engineering, for a separate listing on the Gretai Securities Market of Taiwan. Both are in the contract engineering segment. Technics believes that it can get a better valuation through the listing, which is expected to take place in 1H13.

Strong dividends. The past two years saw high dividend payouts from Technics. For FY Sep12, it guided for a final dividend per share of 8 cents, which would translate to an attractive yield of 8.8%.

On track for another record year. Given its current performance, stable contract pipeline and healthy enquiry levels, Technics looks set to achieve record profits yet again in FY Sep12. Consensus forecasts put its full-year net profit at $21.4m, which implies a FY Sep12F PER of 8.6x.