Technics crossed the magic $20m hurdle this year with an 8.2% increase in the bottom line. FY12 revenue rose 19% to $149.7m, and the gross margin rose to 39% from 37% last year due to a higher proportion of EPCC contracts recognised this year. BUY maintained with TP $1.20.
Norr Offshore Group listing in Taiwan proceeding smoothly. We are expecting pre-IPO in Jan-13 and IPO near the end of the calendar year. Meanwhile, we have made adjustments to our model as the subsidiaries have been diluted, deconsolidated, and now contribute via the Associates line. The major line differences are Revenue (which falls to about S$112m in FY13F), the surge in Associate income, and Minority Interest which falls to nearly zero. As EPCC will be a larger part of revenue, we expect overall margins to improve. Technics will also be in a net cash position from FY13F.
Low-cost yard in Vietnam profitable, Batam yard busier, jetty next CY. We understand that the yard in Vietnam is operating profitably, and operations in Vietnam and Batam are being ramped up. After clearing some approvals processes, we expect the jetty in the Singapore yard to begin operations shortly after the new year. These are the main sources of growth for Technics.
Assume coverage, lower estimates on NOG adjustments. We are assuming coverage on Technics from analyst Jason Saw. Our PATMI forecasts are also reduced due to a lowering of growth assumptions and the dilution of profits from the subsidiaries comprising NOG, the impact of which is only slowly becoming clearer as more information is released to the market.
Maintain Buy with TP $1.20. Our valuation remains at 12x FY13F EPS, a somewhat higher multiple than other companies in the sector due to the valueunlocking catalyst of the NOG listing. The resultant TP is $1.20, and factoring in the 6¢ dividend we expect this year, total upside is 23%.
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