Kim Heng Offshore & Marine

IPO - Offer Price S$0.25
Market Cap S$177.5m

Business Kim Heng Offshore & Marine is an established integrated offshore and marine value chain service provider with over 40 years of experience. Strategically located in Singapore, the Group offers a one-stop comprehensive range of products and services that caters to different stages of offshore oil and gas projects, from oil exploration to field development and oil production. Kim Heng has built its brand over the years and currently caters to world renowned customers from over 25 countries in Southeast Asia, USA, Latin America, Australasia, Middle East and Europe.

Competitive Strengths
One-stop service provider with its comprehensive range of products and services
Kim Heng has a comprehensive fleet of
tugs, barges and heavy-lift equipment such as cranes, forklifts, specialist tools, welding and testing equipment, prime movers, trailers and lowbeds to provide offshore rig-related services and supply chain management services, as well as vessel sales and newbuild services.

Established track record spanning over four decades
Over the last 40 years, Kim Heng has established a reputation as a reliable and responsive service provider in Offshore Rig Services and Supply Chain Management services, as well as Vessels Sales and Newbuild.

Licensed waterfront shipyard facilities
Kim Heng has two waterfront licensed shipyards in Singapore, at Pandan Crescent and Penjuru Road with combined land area of 53.6km2 and waterfront of 205m that are equipped with workshops and open yard space to engage in new construction, fabrication, maintenance and afloat repairs.

Business Strategies and Outlook
Increasing global energy demand & offshore activities
According to the International Energy Agency, the world demand for energy is expected to increase by more than onethird by 2035. The increasing price of oil has made it economical to recover oil offshore.

Regional growth drivers
Companies in Southeast Asia, Australia, the Middle East and Africa have been increasing their investments in exploration and extraction activities. The company stands to gain from these investments. Demand for Offshore Rig Services is also expected to increase, with greater emphasis on safety and compliance standards associated with offshore operations.

Capital expenditure to enhance yard facilities and fleet
Enhancement of yard facilities is aimed to be completed by 2016. The company will also increase the number of ships in anticipation of increasing future demand.

Diversify and expand business through investments, acquisitions and/or Joint Ventures
Kim Heng plans to diversify and expand their business in other sectors of the O&G value chain, especially opportunities in refurbishment and modification services to mature offshore rigs aged 30 to 40 years, to extend their shelf life and engineering service businesses.

Key Risks
State of the O&G industry
The company’s customers largely operate in the O&G Industry. Level of industry activity and hence business is largely dependent on the fluctuating prices of oil and natural gas.

Regulatory risks
Tight regulations are imposed on the company’s clients who are involved in the exploration, development and production of oil. If customers’ licences to operate are revoked or suspended, the company stands to lose its business. Industrial accidents and restrictions on labour sourced from foreign countries may also pose a threat to the business.

Competitive industry
The industry is fiercely competitive in all segments. Competitors may often have better resources, capabilities and technical expertise or may price aggressively to retain market share. Additionally, customers may be multinational companies with significant bargaining power in negotiating pricing and credit terms. Hence, profitability is put at risk.

Timely renewal of lease
Kim Heng’s current lease on its main yard facility at 9 Pandan Crescent expires on 31 December 2015 and there is a risk that it may not be renewed by JTC. If the lease is not renewed, or if the terms of renewal are not commercially viable, there is no guarantee that a replacement yard will be available.

Peer Compare
ASL Marine