Saturday, 22 March 2014

Baker Technology Limited - Better Tomorrow

There is a Maritime Show Exhibition this week in MBS and I visited it. Met a lot of familiar faces and receive a reliable insider news with regards to Baker Technology Limited.


Baker Tech is founded by Benety Chang, who use to be the deputy Chairman of PPL shipyard. He is also the brother of Brian Chang, who in Singapore, we name him as "Father of Jackup Rig"  , i.e. pioneer in Jack up rig business. After PPL which is now a subsidiary of Sembcorp, Brian started Yantai Raffles before he dispose his shares to China CIMC. 

Baker Tech primary business is supplier of Jackup Legs (- few competitors in the world), Jacking system, Cranes, Winches, Skidding System, Fabrication etc which primary are built in its subsidiary Sea Deep Shipyard. Majority of its 

Dividends / Cash

Baker Tech announce dividends of 16% for FY2013, and have a cash of >S$200M = 23.6cents per share considering its price at 31c. The cash mainly comes from its disposal of investment in Discover Offshore Rig. Note the company also have almost no debt. 

Core Business Profit 

If you analyse Baker Tech Core business profit excluding the disposals over the past years, their profit of core business is actually between SGD12-15M. Meaning at 270M market cap, PE of core business is relatively high. 

To stay in growing mode, the company must continue to have profitable investment outside their core business, which is why they had set up BT invest recently and appoint a new MD whose background is in investment rather than oil and gas. 

Most possible investment is ownership of stake in Rigs, since that is what the CEO is most familiar with. 

Insider News

Baker tech is re-organizing its internal organisation structure now. They are also involve in preparation of a big project now utilizing all the cash muscle they possess. However return is not expected in the near term. 

Near Term

In near term, business prospects are very challenging as margin in china which is their core market is getting thinner in view of competitive business outlook. Also there does not exist any more potential divestment that can increase its bottom line as compared to FY2013 and 12. Near Term short!

2 Years Later 2016

The potential is coming in 2016. Near term, investor please continue to get your lucrative dividends for FY2013. FY2014 and 2015 is definitely not so promising for the company. 

2016 onwards if there is no major crisis, we can expect some good growth in share price. 


Long Term .... Long


4 comments:

  1. Thanks for the heads up. I knew they had to do something with their cash soon. Hopefully its a good venture out. Waiting and waiting....

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  2. Hi SGYI,
    With the experience and focus of this company in Rigs, I am sure the venture will be a real good one. Quite sure your wait will be fruitful.

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  3. Rolf, I like their bal sht and Cashflow management but if you read their AR there is major single customer concentration - >50% for 1 single in 2013 and I recall 70% for top 2 custs. Any insights? Seems ULTRA risky.

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  4. Hi Elizabeth, Thanks for commenting. You are spot on. The concentration of client and geographical business in China is risky. I think the management realise this also. That is why they started two more division Baker Engineering going into Liftboat business and BT Invest focusing on investment of O&M assets this year. Please refer to my recent blog http://rolfsuey.blogspot.sg/2014/08/baker-tech-near-term-challenges-but.html . I am not vested in the company, because I think the near term prospect from core business is not looking bright resulting from margin thinning from the increase competition in China. Nevertheless if the two new divisions do well, Baker business may pick up yet again, but probably in 2016 onwards.

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