KUALA LUMPUR: The two new offshore subsea construction vessels — Siem Daya 1 and Siem Daya 2 — that Daya Materials Bhd intends to buy for US$282.3 million (RM985.22 million), will be among the key drivers of the group’s performance for the next financial year ending Dec 31, 2015 (FY15).
Indeed, the group’s managing director Natham Tham told The Edge Financial Daily recently that the company is optimistic about posting better results in FY15 than in FY14 with the new vessels.
“We’ll be profitable this year, and we expect better things to come in 2015, once we purchase the vessels,” he said.
Daya Materials’ cumulative net profit for the first nine months of FY14 was RM14.56 million, down 23% from RM19 million a year earlier, even though revenue was up 29% to RM482.1 million from RM373.58 million.
“The purchase of the vessels will be one of the most important key performance indicators for us, going forward, because of the savings that we can generate by purchasing the vessels rather than chartering them,” said Tham.
He said the new vessels will result in a 25% reduction in costs, “which will go straight to the bottom line”, as opposed to chartering third party vessels, which are typically more expensive.
Daya’s shareholders approved the purchase of the vessels at an extraordinary general meeting (EGM) last Tuesday. The group intends to finance the purchase with a funding exercise that comprises a placement of up to 25% of its shares, a renounceable rights issue to raise up to RM230 million, and an issuance of seven-year redeemable convertible secured bonds of up to RM120 million in nominal value.
Moreover, the higher utilisation of the vessels will also drive growth next year, Tham said, as the company has already secured long-term contracts for the vessels up to 2020.
Its gross order book stands at RM2.2 billion; 60% oil and gas (O&G) contracts and the remaining 40% for technical services.
Despite the dizzying lows that crude oil has fallen to recently — it dipped below US$60 per barrel last Thursday for the first time in five years — Tham said the demand for vessels is still strong. As a case in point, he said Daya Materials is still supplying to existing refineries and petrochemical plants, which are operating as usual.
Tham noted that the subdued oil prices will mostly affect those involved in costlier non-conventional oilfields like oil sands and shale oil, while Daya is involved in conventional oil.
“At the current level, it will not affect our business much. But it depends on how low the price will go. In the very unlikely event that it drops to about US$30 to US$40 per barrel, obviously more impact would be felt throughout the O&G industry,” he said.
In the meantime, as the demand for vessels is still healthy, Tham said Daya will be looking into chartering third party vessels to meet demand, if it makes sense cost-wise.
“It costs more to charter third party vessels as the vessel owners would naturally extract a certain margin for themselves. [So] we will consider that only when it makes commercial sense for us to do so,” he said.
On Petroliam Nasional Bhd’s plan to cut 15% to 20% of its capital expenditure (capex) next year due to the low oil prices, Tham said this will not have a significant impact on Daya Materials’ performance as Petronas’ contribution to its revenue is minimal.
“Less than 15% of our revenue comes from Petronas or Petronas-related companies,” he said, adding that the development would have more impact on the upstream segment.
For now, the downstream petrochemical segment has “continued to improve”, he said, noting that there is no visible slowdown in the downstream plants that Daya Materials supplies to.
Daya Materials closed unchanged at 17 sen last Friday, giving it a market capitalisation of RM236.1 million.
This article first appeared in The Edge Financial Daily, on December 15, 2014.