Ocean Vantage finds opportunities during crisis

KUALA LUMPUR: ACE Market-bound Ocean Vantage Holdings Bhd’s net profit and revenue are likely to be flat in the financial year ending Dec 31, 2020 (FY20) compared with last year despite the onslaught of the Covid-19 pandemic.

For FY19, Sarawak-based oil and gas integrated support services provider posted revenue and net profit of Rm58.3mil and Rm6.9mil respectively.

Ocean Vantage managing director Kenny Ronald Ngalin said the group’s top line and the bottom line for FY20 are expected to be flat or more as the group obtained more projects during the three phases of the movement control order.

“In the wake of the crisis, we always find pockets of opportunities to grow our business,” he told reporters after its digital prospectus launch.

Given the volatility in oil prices this year, Kenny noted that one key strategy the group has adopted is asset-light strategy which helped it to sail through the volatile oil price cycle.

“The advantage for us in adopting an assetlight strategy is that it is easier for us to scale down activities compared with bigger companies during a challenging period such as the Covid-19 pandemic, volatility in oil prices or an economic downturn.

“This is because we do not have to spend too much on maintenance or repayment of bank insurance.

“Whether the oil price is US$100 or US$40 per barrel, our business is intact. Our adaptive asset-light strategy has proven its resilience over the years as reflected in the growth of our operations and financial performance,” he said.

As of end-2019, the group’s assets stood at Rm7.9mil consisting of machine and equipment as well as fabrication yard at Senai in Johor.

Currently, the group supports upstream and downstream activities in the oil and gas (O&G) industry by providing services such as engineering, procurement and construction (EPC) and project management, supply of manpower, materials, tools, and equipment, as well as drilling rig charter services.

According to Ocean Vantage chief financial officer Chang Vun Lung, an asset-light strategy means that the group only purchases assets that are strategic to the company.

“When adopting an asset-light strategy, the group’s gearing ratio is not impacted,” he said.

Meanwhile, the gearing ratio of Ocean Vantage, which is en route to ACE Market of Bursa Malaysia on July 22, is expected to drop to 0.04 times post-listing from 0.07 times currently.

Upon listing, Ocean Vantage will have a market capitalisation of Rm106.9mil based on the issue price of 26 sen and its enlarged share capital of 411 million shares.

On the contrary, Ocean Vantage executive director Stephen Yau Kah Tak believes it is a “perfect time” to do the listing exercise given that the group will be able to raise around Rm21.4mil funds despite the downturn cycle in the market.

“This type of crisis will transform us from a small to a big player,” he said.

Ocean Vantage would utilise around Rm3.2mil or 15.1% of total proceeds to broaden its range of support services for the upstream O&G industry to include underwater diving services as well as advance non-destructive testing and inspection services.

Around Rm8.6mil or 40.2% of the proceeds will be used as capital expenditure to strengthen its project management capabilities in the downstream O&G segment.

A total of Rm6.6mil or 30.7% of the proceeds would be used for working capital, with the balance Rm3mil or 14% is earmarked for listing expenses.

As of June this year, the group has forked out capital expenditure (capex) of about Rm3mil for both upstream and downstream sectors.

In the next six months, Yau pointed out that the group plans to focus its the expansion plans specifically in the downstream sector and buying more equipments mainly used for rigging and lifting activities.

Of the proceeds raised for the downstream segment, around 10% to 20% of Rm8.6mil will be used to buy equipment in the next six months.

Besides that, Kenny pointed out that company intends to pay dividends in the next “few years” subject to its financial performance, expansion of its business and stronger cash flow.

“Right now, there is no dividend policy as the company is still growing,” he said.

Moving forward, Yau said the group is looking to increase its market share in the petrochemical industry and expand its presence in Sarawak by tendering for more projects from the state government.