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OTTO MARINE LIMITEDBuilding upon strong fundamentals
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OTTO MARINE LIMITEDDisclaimer
This presentation and the associated slides contain confidential information about Otto Marine Limited (the “Company”) and its subsidiariesand associates (together with the Company, the “Group”).
By accepting such information, the recipient agrees to keep permanently confidential all information contained herein and that it will use suchinformation only for the purpose it has disclosed to the Company for participating in this presentation and not for other purposes and will notdivulge any such information to any other party without the express consent of the Company. Any reproduction of such information, in wholeor in part, is prohibited without the permission of the Company.
This presentation includes only summary information and does not purport to be comprehensive. The information contained in thispresentation has not been subject to independent verification. No promise, guarantee, representation, warranty or undertaking, express orimplied is made as to and no reliance should be placed on the fairness accuracy reliability completeness or correctness of the informationimplied, is made as to, and no reliance should be placed on, the fairness, accuracy, reliability, completeness or correctness of the informationor opinions contained herein. Neither the Company, any other company within the Group or its advisors, nor any of their directors, officers oremployees or any representatives of such persons, shall have any responsibility or liability whatsoever (in negligence or otherwise) for anyloss arising from any use of the information or any other information or material discussed.
This presentation contains forward-looking statements relating to the business, financial performance and results of the Company. Thesestatements are based on current beliefs, expectations or assumptions and are subject to unknown risks and uncertainties that could cause, p p jactual results, performance or events to differ materially from those described in such statements. These risks, uncertainties and other factorsinclude, but are not limited to, economic conditions globally, the impact of competition, political and economic developments in countries inwhich the Group operates and regulatory developments in those countries and internationally, foreign exchange rates, oil and gas prices andthe completion of ongoing transactions. Many of these factors are beyond the Company's ability to control or predict. Although the Companybelieves that its expectations and the information in this presentation were based upon reasonable assumptions at the time when they weremade, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this presentation.
Nothing in this presentation constitutes and shall not in any circumstances be construed as an invitation or an offer to purchase or thesolicitation of an offer to purchase any securities issued by the Company or any advice or recommendation with respect to such securitiesand no part of this presentation shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.
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OTTO MARINE LIMITEDAgenda
• Overview of Otto Marine• Overview of Otto Marine
• Investment Merits
• Business Segments
• Financial Highlights
• Industry Outlook Growth Strategies
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• Industry Outlook, Growth Strategies
Click to edit Master text stylesSecond level1 Overview of Otto Marine
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1. Overview of Otto Marine
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OTTO MARINE LIMITEDOverview
• Offshore Marine Group – engaged in Shipbuilding / Repair & Conversion, Chartering /Leasing and Specialised Servicesg p
• Headquartered in Singapore – commercial, procurement, and treasury support to ouroverseas operations (Indonesia, China, UAE, etc)
• Shipyard in Batam Indonesia – strong management and engineering team capable of• Shipyard in Batam Indonesia – strong management and engineering team capable ofdelivering complex and deep water offshore vessels
• Strategic direction – provider of specialised offshore vessels and services in nichetechnical segments (i.e. seismic, subsea, offshore construction, etc)g ( , , , )
• Customers – primarily specialised offshore service providers in niche segments, andfleet operators in the oil and gas industry
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OTTO MARINE LIMITEDShare Statistics
Share price (Closing on 8 Nov 2011) S$0.135
Market capitalization S$255 2 millionMarket capitalization S$255.2 million
52 week high / low S$0.37 / S$0.129
P/B 0.62
Net Gearing 1.66
Number of shares 1,890,429,000
Major shareholders Yaw Chee Siew (63.64%)Major shareholders Yaw Chee Siew (63.64%)Lee Kok Wah (5.28%)Standard Chartered (4.30%)
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( )
OTTO MARINE LIMITED
2 Investment Merits2. Investment Merits
OTTO MARINE LIMITEDInvestment Merits
• Shipbuilding net order book of S$81.3m/US$62.5m (at 30 September 2011)
delivered 40 OSVs in the last 5 years– delivered 40 OSVs in the last 5 years
• Chartering revenue to provide steady cash flow– OSVs chartered on medium to long term basis
• Specialised services– service and vessel provider in strategic niche segments which command highermargin (i.e. seismic, subsea vessels for well intervention, ROV, IMR, etc), seismicbacklog contracts worth US$40.1m as at 30 September 2011
• Customer base
– ABCmaritime, Esnaad, Falcon Energy Group Limited, Mosvold Supply, MarineABCmaritime, Esnaad, Falcon Energy Group Limited, Mosvold Supply, MarineSubsea AS, Norshore Shipping, Robert Knutzen Shipholdings
• Strong engineering and experienced management team
average of more than 30 years experience in offshore vessels building
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– average of more than 30 years experience in offshore vessels building
*(US$1.00 = S$1.3015)
OTTO MARINE LIMITEDInvestment Merits
Customer base includes:
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OTTO MARINE LIMITEDInvestment Merits
F L R R i Th i L K k W h Y Ch Si d
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Front L to R: Reggie Thein (Director), Lee Kok Wah (President & Group CEO), Yaw Chee Siew (Executive Chairman) and Heng Hock Cheng @ Heng Heyok Chiang (Director)
Back L to R: William Alastair Morrison (Director), Craig Foster Pickett (Director) and Ng Chee Keong (Director)
OTTO MARINE LIMITED
3 Business Segments3. Business Segments
OTTO MARINE LIMITEDBusiness Segments
Shipbuilding / Ship Repair and Conversion
Ship Chartering• Two-pronged approach –
Strategic Partnerships and100% d fl t
SpecialisedServices• Service and vessel provider in
• Construction of complex, high-spec & environment friendlyOSVs (e.g. AHTS, PSV,offshore construction vessel)
• Repair / conversion of wide
100% owned fleet• Mainly deployed by customers
in Singapore, Indonesia,Australia, West Africa andother South East Asiacountries
Service and vessel provider instrategic niche segmentswhich command higher marginsuch as seismic and subseavessels
• Seismic operator R fl t G h i lRepair / conversion of wide
range of vessels (e.g. OSVs,ocean-going tug)
• Sophisticated vessels for NorthSea operations that meet theABS or DNV classO 64 h hi d i B
countries• Vessels are on medium to long
term time and bareboatcharters
– Reflect Geophysical *Orient Explorer *Reflect Aries *Pacific Titan
• Subsea vessel provider, with ROV capabilities
• Owns 64 ha shipyard in Batam• Selective outsourcing to
China shipyards• Build-to-order
p– Surf Subsea Inc
* Surf Challenger
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OTTO MARINE LIMITED
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OTTO MARINE LIMITED
Focus on high specifications and higher value vessels
Target European / North Sea market that
Global customer base:
- Norshore ASrequire ABS or
DNV class vessels
- ABCMaritime- Mosvold Supply
AS
Ship designs from renowned
N iSelective
outsourcingNorwegian design houses- Marin Teknikk
AS
outsourcing- Allows focus on
sophisticated vessels in Batam
shipyard
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- Vik-Sandvikshipyard
OTTO MARINE LIMITED
Strategically Located Shipyard
SingaporeHeadquartersHeadquarters Strategic advantage due to Singapore’s position as
a regional marine and offshore industry hub
− Access to marine and offshore support
− Access to expertise
− Close proximity to SEA shipbuilding hub
− Ready supply of qualified Indonesian workers
Batam, IndonesiaOwn and operate PT. Batamec - 64 hectare shipyard in Batam
Major South-East Asian shipbuilding hub
− Access to large pool of workers in Indonesia
− Only 1 hour away from Singapore by ferry
15We are able to access marine expertise in Singapore and utilise
a ready supply of workers in Indonesia
OTTO MARINE LIMITED
Shipbuilding: Complex Offshore Support Vessel
Small to medium AHTS(< 14,000 bhp)
Large AHTS(> 14,000 bhp) Offshore construction vessel
Supply & anchor handling role Supports Jack-Ups & standard depth Semisubmersibles
Drilling Unit for field support and construction duties
Work barge with 300 d ti Platform supply vessel Other vessels300 pax accommodation pp y
To support accommodation i t
Transportation of cargo to ff h il ig d l tf
Utility vessels Work maintenance boats
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requirements offshore oil rigs and platforms Work maintenance boats Others
We have a specialised focus on North Sea class offshore support vessels
OTTO MARINE LIMITED
One of the largest yards in Batam
Land area of 64 hectares
Waterfront of 650 metersWaterfront of 650 meters
1 dry dock
2 slipways (under construction)
Syncrolift
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OTTO MARINE LIMITED
The Syncrolift® : Increasing Efficiency of Yard
• Large lifting system, which raises and lowers vessels in and out of the water for
What is itlowers vessels in and out of the water for dry-docking ashore
What it does
• Allows construction and repair of up to 16* vessels at one time
The
• Waterfront efficiency is multiplied • Much faster than using a drydock or
traditional vessel launchThe Advantage
traditional vessel launch
18*using 10,800 bhp vessels as a benchmark
OTTO MARINE LIMITED
Shipbuilding: Strong Engineering Capabilities
Right mix of personnel and tools needed for sophisticated vessels
Led by highly qualified senior engineers I h d i t I t t i ft D t il d i iIn-house design team
+
Investments in software Detailed engineering
=+ = Team of naval architects
and engineers
3D design software, TRIBON®
Precise virtual model
Key benefits
Minimises errors resulting in a more efficient shipbuilding process
Greater accuracy in shipbuilding
Productivity and cost efficiency
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y y
We utilise our strong engineering capabilities to provide turnkey solutions for our customers
OTTO MARINE LIMITEDCompetitive Market Share
BatamecBatamec Shipyard -Ranked 8th in Asia AHT/AHTS newbuildsnewbuilds
20Source: quoted from DnB NOR initiation report dated 1 February 2010
OTTO MARINE LIMITED
Globally Recognised Sophisticated Yard
•Efficient operational capabilities and technical expertise elevates Otto’sposition as a sophisticated shipbuilder.
21Source: http://www.standard-club.com/docs/MikeMeade.pdf
OTTO MARINE LIMITED
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OTTO MARINE LIMITED
Expansion of Chartering Operations (As at 30 September 2011)
Two forms of chartering100% Owned charter fleet (100% ownership)
Expected own charter fleet(No. of vessels)
29 operational; 4x 10k bhp AHTS, 4x 6k bhp AHTS, 1x 7k bhp AHTS, 1x 8k bhp AHTS, 2x 61m maintenance, 1x 75m, 5x 40m AHTS, 1x 300men accommodation work barge, 5tug, 5 barge
5 joining in 2011/2012
10 15 25 30 34
5 joining in 2011/2012; 3x 28k bhp AHTS, 1x 8k bhp AHTS, 1x 300men accommodation work barge
Strategic partnerships (up to 49% equity interest) Expected JV charter fleet
08 09 10 11E 12F
Strategic partnerships (up to 49% equity interest)
6 operational; 2x 300men accommodation work barges; 4x 5k bhp AHTS
1 under construction;
1 6 7 6 7
08 09 10 11E 12F
Expected JV charter fleet(No. of vessels)
1x 75m 08 09 10 11E 12F
23We expect to grow our chartering income rapidly, on the back of
the growth in our charter fleet size
OTTO MARINE LIMITEDStrategic Partnerships
Otto Marine Strategic Partner
49% 51%
Otto books income from associates3 2 Strategic partner associates3
12 Strategic partner
manages & operates vessel
100%
Otto sells vessel to JV Company at
market price
JV Company
Our partners
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Key benefits
Leverage on partner’s expertise and global
Vessel
1. ABCmaritime AG
2. Hoe Leong Corporation
3. Go Marine Australia
Leverage on partner’s expertise and global networks
No direct competition with our shipbuilding customers
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4. Surf Subsea Inc. Passive, consistent & recurring income
Our strategic partnerships are structured to be a “win-win” situation
OTTO MARINE LIMITED
Investor Relations Contact : Kamal Samuel | Tel: 6438 2990 | Email: [email protected] 2525
OTTO MARINE LIMITEDSpecialised Services
Service and vessel provider in strategic niche segments hi h d hi h i h i i d b which command higher margin such as seismic and subsea
vessels
I. Seismic operator – Reflect Geophysical (81.8% owned) * Orient Explorer * Reflect Aries * Pacific Titan* Pacific Titan
II. Subsea operator - Surf Subsea Inc (19.2% owned) *Surf Challenger
Offshore Service that provides better margin and enhance our performance
Surf Challenger
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OTTO MARINE LIMITED
4 Financial Highlights4. Financial Highlights
OTTO MARINE LIMITEDResults Summary: 9M2011
Revenue 58% S$206.3m
Gross Profit / Loss
58%
S$10 1m LossGross Profit / Loss
O ti l E
S$10.1m Loss
S$25 0Operational Expenses S$25.0m16%
PATMI S$51.1m Loss
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OTTO MARINE LIMITEDHistorical Performance
Revenue(SGD millions)
206.3
(SGD illi )
PATMI(SGD millions)
(51 1)(51.1)
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OTTO MARINE LIMITED
Segmental Performance 9M2011 vs. 9M2010
S$’million 9M2011 9M2010 Change %Shipbuilding, ship repair and conversion (1) 110.8 416.3 (73.4)
Ship Chartering 21.1 11.4 85.4
Leasing 17.6 15.6 12.6
Geophysical (2) 45.0 43.3 4.0
Subsea Services 11.8 - N.M.
Total Revenue 206.3 486.6 (57.6)
Gross Profit/ (Loss) (10.1) 96.8 N.M.
Gross Profit/(Loss) Margin (%) (4.9) 19.9 -
Profit/(Loss) Before Tax (56.5) 51.1 N.M.
Net Profit/(Loss) (att to Share Holders) (51 1) 49 9 N MNet Profit/(Loss) (att. to Share Holders) (51.1) 49.9 N.M.
Net Profit/(Loss) Margin (%) (24.8) 10.3 -
Earnings Loss Per Share (SGD cents) (2.71) 2.68 N.M.
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OTTO MARINE LIMITED
Segmental Performance 3Q2011 vs. 3Q2010
S$’million 3Q2011 3Q2010 Change %
Shipbuilding, ship repair and conversion 16.8 50.0 (66.3)
Ship Chartering 8.8 4.0 117.9
Leasing 5.7 6.8 (16.6)
Geophysical 14.8 19.5 (23.8)
Subsea Services 5.2 - N.M.
Total Revenue 51.3 80.3 (36.1)
Gross Profit/ (Loss) (0.7) 7.2 N.M.
Gross Profit/(Loss) Margin (%) (1.4) 9.0 -
Profit/(Loss) Before Tax (20.3) 8.6 N.M.
Net Profit/(Loss) (att. to Share Holders) (19.8) 8.7 N.M.Net Profit/(Loss) (att. to Share Holders) (19.8) 8.7 N.M.
Net Profit/(Loss) Margin (%) (38.6) 10.8 -
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OTTO MARINE LIMITEDConsolidated Balance Sheet
S$’million 30 Sep 2011 31 Dec 2010
Current assets 859.5 857.8
Non-current assets 721.2 679.5
T l 1 580 7 1 537 3Total assets 1,580.7 1,537.3
Current liabilities 728.6 708.9
Non-current liabilities 442.1 358.5. .
Total liabilities 1,170.7 1,067.5
Net Asset Value Per Share (SGD cents) 21.69 24.85
Net Gearing Ratio # 1.66 1.04
32Note: # Total borrowings less cash and bank balances over equity
OTTO MARINE LIMITED
Consolidated CashflowStatement
S$’million 9M2011 9M2010
Net cash used in operating activities (142.7) (180.4)
Net cash used in investing activities (6.8) (110.8)
N h f fi i i i i 55 4 209 4Net cash from financing activities 55.4 209.4
Net decrease in cash and cash equivalent (94.1) (81.8)
Cash and cash equivalent at beginning of 149 8 227 2Cas a d cas equ vale t at beg g o period 149.8 227.2
Effects of exchange rate changes on the balance of cash held in foreign currencies 0.8 (15.6)balance of cash held in foreign currencies
Cash and cash equivalent at end of period 56.5 129.8
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OTTO MARINE LIMITEDRevenue Breakdown
Revenue (S$’mil)
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OTTO MARINE LIMITED
Gross Profit Breakdown
Gross Profit & Margin
35Gross Profit (S$’m) Gross Profit Margin
OTTO MARINE LIMITED
Revenue and Gross Profit by Business Segments
Shipbuilding, Ship Repair and Conversion
(SGD illi )Revenue decreased 73.4% to S$110.8 million
while gross profit decreased from S$69.3million to gross loss of S$22.5 million:
•Due to less progress of work achieved with sales
(SGD millions)
p gcontract for which revenue is recognised based on
the % completion method
•The loss was mainly due to the reversal of profits recognised for the terminated sale contracts for the
two vesselst o esse s
•The profit on the vessel sold in September 2011 has not been recognised as conditions precedent have
not been completely fulfilled
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OTTO MARINE LIMITED
Revenue and Gross Profit by Business Segments
Ship Chartering
(SGD illi )(SGD millions)
Revenue surged 43% to S$38.7 million and gross profit improved from S$21.0 million to
S$22.2 million in 9M2011:•Due to enlarged fleet sizeg
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OTTO MARINE LIMITED
Revenue and Gross Profit by Business Segments
Specialised Services
(SGD illi )
Reflect Geophysical registered revenue of S$45 0 million up 4% but incurred a S$12 3
(SGD millions)
S$45.0 million, up 4% but incurred a S$12.3 million gross loss in 9M2011
• Due to lower utilisation of seismic vessels
S b b i t ib t d S$11 8 illi iSubsea business contributed S$11.8 million in revenue and S$2.5 million in gross profit in
9M2011
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OTTO MARINE LIMITEDNet Profit & Profit Margin
Net Profit (att.to shh.) and Net Profit Margin(SGD illi )
9M2011 vs. 9M2010 Net Profit & Net Profit Margin
Net Profit decreased from S$49.9 million in 9M2010 to a net loss of S$51.1 million in 9M2011 & Net Profit Margin
(SGD millions)
$ gdecreased from 10.3% to (24.4)% due to:
• Decrease in revenue in 9M2011 due to less progress workachieved with sales contract
• Decreased profitability due to the reversal of profit recognised for the terminated sales contract for two vessels
• Reduction in gross profit from geophysical segment due to lower utilisation of seismic vessels
• Higher finance cost due to larger chartering fleet
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OTTO MARINE LIMITED
5 Industry Outlook5. Industry Outlook Growth Strategies
OTTO MARINE LIMITEDIndustry Outlook
Soaring oil prices will excite O&G spending which will increase demand for OSV and PSVdemand for OSV and PSV
8% growth previously, now expected 12% - 15%
CAPEX spending
Graph A Graph B
41Source: Graph A: DnB NOR initiation report dated 1 February 2010
Graph B: http://www.dockwise4.com/annual2009/?id=14
OTTO MARINE LIMITEDIndustry Outlook
Otto Marine will stand to benefit from the recovery in the industry as players move towards deeper water
CAPEX development (includes next to drilling activities, also engineering, geosciences and support services) Deepwater CAPEX by region
Graph A
Graph B
42Source: Graph A: http://www.dockwise4.com/annual2009/?id=14
Graph B: http://www.epmag.com/Magazine/2010/5/item58177.php
Potential demand for new builds!
OTTO MARINE LIMITEDGrowth Strategies
• Focus on the demand for offshore vessels for deep water operations which isexpected to improve gradually as the oil majors have increased their spendingexpected to improve gradually as the oil majors have increased their spendingand looking more towards deep-water drilling projects
• Ride on our strength as a premium builder to attract the top OSV operators
• Accelerate growth of chartering business to compliment cyclical nature ofshipbuilding business:
• Expand our presence in the oil and gas market in Australia through Gop p g gMarine.
• Expand into the African market through Global Workboats.
St th i li d i t b l i t k f• Strengthen our specialised services segment by leveraging on our network ofglobal players in the deep water and subsea activities
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OTTO MARINE LIMITEDTackling Issues
Immediate Concern 1 – 2 cancelled vessels (Hull No. 7048 and Hull No. 7049)
• Management is evaluating various options on hand to deal with the cancelledvessels
• May either sell these vessels at market value or aim at amalgamating them in theGroup’s fleet to charter them out
• These very sophisticated vessels are sister vessels to ‘Deep Sea 1’ that recentlyattained the coveted maritime class certification from DNV
• Already a number of enquiries for these vessels
• World market for this size AHTS has improved in the past months as evidenced bythe rise in the charter rates in the North Seathe rise in the charter rates in the North Sea
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OTTO MARINE LIMITEDTackling Issues
Immediate Concern 2 – Streamline Reflect Geophysical’s Operations
• Intensify marketing efforts to improve utilisation of the vessels
• Target projects which are physically proximate to minimise mobilisation time so as
to maximise full production revenue
• Change cost structure for vessels from fixed to variable
• Seek synergy within the Group to manage the vessels as compared to
outsourcing
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OTTO MARINE LIMITED
6. Thank YouQ & A