EA Technique seeking to replenish orderbook
KUCHING: EA Technique (M) Bhd (EA Technique) is aggressively looking for more contracts to replenish its orderbook.
Following a company’s briefing, the research arm of TA Securities Holdings Bhd (TA Research) in a report yesterday said the company has submitted bids for several projects.
The research firm noted EA Technique is one of the final two bidders for a five-year US$110 million local engineering, procurement, construction, installation and commissioning (EPCIC) contract.
It gathered that the group had submitted its bid much earlier in 2014, thus implying the contract might be awarded in the near future.
TA Research said the management of the company is optimistic of its bid given that the group is more competitive versus other large Malaysian yards whom have high fixed overheads.
TA Research believed the contract award will enable timely replenishment of the group’s engineering orderbook, post delivery of its floating, storage and offloading (FSO) for the Bergading field in North Malay Basin off the shore in Peninsular Malaysia by the second half of this year (2H16).
Besides that, the research firm also noted EA Technique had recently submitted a bid to supply six harbour tugboats to Johor Port.
It observed those tenders were to replace expired contracts previously serviced by foreign vessels (mostly Singapore-flagged).
After a discussion with the company’s management, the research firm said they see numerous opportunities for import-substitution of product tankers and also port vessels in Johor.
TA Research pointed out that one of EA Technique’s main clients, Petronas Chemicals Group Bhd is currently served by 12 foreignflagged product tankers.
Given the scarcity of local players in the import-substitution of product tankers business, it believed EA Technique has a favourable chance of replacing those foreign tankers.
Furthermore, it noted international players were less keen on Malaysian contracts given the weakness of the ringgit.
On top of the tenders mentioned, TA Research said EA Techique has also submitted bids for a slew of other projects.
The research firm outlined the projects including a 1+4 commodity bulk carrier for 3+2 years, a contract for three tug boats for port services in the Middle East, two units of offshore support vessels (OSVs) in Malaysia for an estimated RM20 million per annum, a 20-year offshore and marine (O&M) contract for Bergading FSO, two product tankers for 5+3 years, a contract for 1+2 chemical tankers for three years, estimated to start from third quarter of 2016 (3Q16) and an FSO contract in Southeast Asia.
Given the vast opportunities available to EA Technique, it said the company’s management did not discount the possibility of raising equity capital to finance the successful bids.
In view of that, TA Research is positive on the measure as long as the corporate exercises are earnings per share (EPS) accretive to the group.
In addition, the research firm believe the company’s shares will also be benefiting from a liquidity boost and an expanded share capital would ease EA Technique’s balance sheet to gear up for future projects.
Additionally, TA Research believed the company’s Bergading EPCIC contract will provide another bumper year of earnings for the group in financial year 2016 (FY16) supported by approximately 45 per cent revenue recognition against 40 per cent in FY15.