E.A. Technique (M) Bhd is preparing to bid for another RM300 million worth of floating, storage and offloading (FSO) jobs this year.

“Our current tender book is worth RM700 million, not counting the RM300 million of jobs we will bid for overseas this year,” managing director Datuk Abdul Hak Amin tells The Edge, without elaborating.

The jobs will likely come in towards the fourth quarter of the year and have a forward impact on the marine vessel operator that was listed on Bursa Malaysia last December. As

Abdul Hak observes, E.A. Technique (fundamental: NA; valuation: NA) has enough contract flow for now.

A weak oil and gas market has prompted the company to focus on getting a steady stream of jobs for next year and beyond to make some headway in the FSO space.

Brent crude oil prices, which fell over 60% from August last year to about US$45 per barrel in January, are currently trading above US$60 per barrel. Abdul Hak says he expects crude oil to hover around US$70 to US$80 per barrel this year.

Thanks largely to the recognition of its engineering, procurement, construction, installation and commissioning (EPCIC) contract in a full field development project in the North Malay Basin, the company released stellar first-quarter results on May 21. Net profit jumped 92% year on year to RM7.37 million for the quarter ended March 31, on the back of revenue surging 101% y-o-y to RM72.73 million.

“We will recognise annual revenue of about RM170 million to RM180 million from the

EPCIC contract for the next four years,” Abdul Hak says, adding that this will likely double the company’s earnings for the financial year ending Dec 31, 2015 (FY2015). “We are expecting a 10% margin from the contract, which could translate into a net profit of about RM17 million to RM18 million a year from it.”

By comparison, E.A. Technique’s revenue in FY2014 was RM155.7 million — up 28% y-o-y — while net profit tanked 74% to RM14.6 million as it came off a high base in FY2013, when the company booked a gain on disposal of an associate company of RM37.5 million and a share of profit from an associate amounting to RM2.9 million.

The EPCIC contract is worth US$191.8 million (RM700 million) and expires in August 2016. Including the warranty period, however, it has a 44-month duration.

The full field development project was awarded in February by Hess Exploration & Production Malaysia B.V, which is the vehicle through which Hess Corp operates in the North Malay Basin via a production sharing contract with Petroliam Nasional Bhd.

E.A. Technique’s EPCIC job is in the Bergading field, which has a water depth of about 198ft (60m).

One of the company’s FSO vessels — MT Nautika Muar — is operating in the Anjung Kecil oilfield off Sarawak and has three years remaining on its contract while another — MT Fois Nautika Tembikai — has been delivered to the Tembikai oilfield off Terengganu and should begin operating early this month, says Abdul Hak.

The latter vessel has been contracted to Vestigo Petroleum Sdn Bhd for six years at RM190 million.

E.A. Technique, whose largest indirect shareholder is Johor Corp via Kulim (M) Bhd with a 50.5% stake as at March 31, also provides port marine services, such as vessels, mooring gangs and harbour tugboats with bollard pull of 30 to 60 tonnes that yield a profit margin of about 15%, and plans to expand these. It has 15 vessels at the moment and aims to build nine new tugboats by the end of the year.

In an earlier interview with The Edge, Abdul Hak had said that RM200 million had been set aside for another 10 to 12 tugboats over the next three years, which would increase local market share to about 35% from 20% now.

It is noteworthy that on May 20, the company received an Unusual Market Activity (UMA) query from Bursa. The stock had been trending upwards since late April, surging 37% to close at RM1.17 on May 19, the day before the query. This was almost double its initial public offering price of 65 sen per share, which market observers said was an impressive performance, given the poor oil and gas climate.

The stock has since retreated and closed at RM1.06 last Wednesday, giving it a market capitalisation of RM534.24 million. Based on its FY2014 earnings per share of 3.69 sen, the market is valuing E.A. Technique at a historical price-earnings ratio of 28.7 times.

While its historical PER may seem high, stronger profits this year, thanks to the EPCIC contract, should narrow down its valuation.

Among the Malaysian players occupying the FSO space, only Bumi Armada Bhd (fundamental: 1.05; valuation: 0.8) is trading at a higher PER of 32 times. MISC Bhd (fundamental: 1.2; valuation: 0.8) is trading at 17 times, Yinson Holdings Bhd (fundamental: 1.5; valuation: 1.5) at 13 times, Coastal Contracts Bhd (fundamental: 3.0; valuation: 1.8) at 7.5 times and Perisai Petroleum Teknologi Bhd (fundamental: 0.65; valuation: 1.1) at 22.6 times.

As at March 31, E.A. Technique’s net asset value per share was 55 sen. It had RM26 million in cash and bank balances but accounting for RM317.3 million in total borrowings, net debt stood at RM291.3 million, or 1.08 times its total equity of RM270 million.

Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in The Edge Malaysia Weekly, on June 1 - 8, 2015.

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