Monday, 31 March 2014

Successful Wealth Management – Part 1

We have to admit that a major part of our life today revolve around the word "money". As a Chinese saying 钱不是万能, 但没钱是万万不能! Money is not everything, but you cannot live without money! It is all about Dollars and Cents! It should be Dollars and “Sense”.

Having money alone is not sufficient. We need to have the knowledge of handling it. In the following, we will look at very basic but important aspects of successful wealth management – Financial Planning.

Save

One of the most important criteria of successful wealth management is the ability to save. If we save a minimum a tenth a year, in 10 years you have saved what you earn in 1 year. If possible, I suggest we save at least 30% of what we earn when we are before age 30. Once we are married at age 30 and beyond, expenses are more hectic due to housing and children, hence a savings of 20% of income becomes more practical.


Fresh graduates age 25 to 30 ys old – Save 30% of income. This group require savings for at least 5 years to prepare for marriage and housing. E.g. Average income is S$3.5k per month. Take back S$2.5k. Save 30% is S$750 per month. Plus year-end additional wage, should save at least 10k per annum. per person. In 5 years time the couple will have 100k savings.

For married couples age 30 yrs old and beyong – Save 20% of income. For instance, average household income is S$10k per month. Take back S$8k. Save 20% is 1.6k per month. Plus year-end additional wage, should save at least S$20k per annum per household. In 10 years, the couple will have 200k savings.

Aside from savings for marriage, housing or investments, we should also keep a portion of cash for emergency or in situations where we are out of job. The rule of thumb is to keep sufficient cash or liquid assets (readily convertible to cash) to be able to last you or your family for a minimum period of 12 months or beyond.

Be consistent in your savings and soon it will become a habit. 

Expenses & Debt


The first thing after receiving your monthly income is not to pay your bills, but to keep a part of what you earn first! Control your expenditures; do not mix up your desires with your expenses! Pay debt promptly and never purchase what you are unable to pay for. 


Own Your Own House


Own your house. Do not rent it. If within means, owning a bigger house progressively when you are young and downgrade to smaller house when you retire can be a good strategy. E.g. a house that is worth S$800k now may be worth S$2 million or more when you retire 30-35 years later. By the time you are 60 and beyond, you can sell it and buy a smaller house worth S$1 to 1.5 million and cash out the difference for retirement usage. 

What you Save must Earn


What you save must earn, what you earn must compound earnings. 

One good way is to invest in stocks what you earn, and let the dividends or income growth compound. Refer to my earlier blog about compounding investment. 

Otherwise you can invest in real estate or start your own business. But before that, make sure you had acquired all necessary skills and done your own research thoroughly. Before you buy your first stock or property, first buy yourself few good books to read. Seek advice from people who had done it before you. These advices are free. 

If you put all your savings in the bank and earn less than 1% interest p.a., and with an inflation of 3% per year, your money will devalue 2% each year. Sound investments from stocks give return at minimum 5% per annum with successful ones 10% return or more per year. 

Open your stock account with Lim & Tan, POEMS etc. Alternatively you can also invest in STI exchange traded funds and blue chips at affordable rates as low as S$100 per month by opening OCBC blue chip investment plan

Take Calculated Risk

Guard your money from loss. Do not intrigue by huge earnings when your principal may be lost. A safe and small return is far more desirable than a high risk return. Study each case carefully before parting your money. Do not be misled by your own romantic desires to make wealth rapidly. Invest correctly or entrusting your money in safe hands. Invest in a company with track records of successful business management or make loan to a man of reputation to repay. Stay within your core competence. For instance if you are working in a bank, investing in financial institution gives you an edge to information and knowledge. Consult the wisdom of those with more experience than you in managing wealth or investment.

Insure

Provide in advance for the needs of your growing age and protection of your family. Buy a comprehensive medical insurance earlier when you are free of illness. Protect your property by buying mortgage and fire insurance plan. Insure against unexpected risk of death, total permanent disability and terminal illness. The insurance coverage should be sufficient to last you and your family expenses until old age. 

Will

Make a will so that you have proper and honourable division of your wealth among your family members later, without any dispute. 


Charity


What you earn, you must give back a part of it to the society. Have compassion for the unfortunate within you reasonable means. 

Wisdom or Money

Without wisdom, money is quickly lost by those who have it, but with wisdom, money can be secured by those who don't have it. Is it better to strike S$1 million lottery or to acquire the skills to earn S$1 million? Once you have wisdom, you have ability to earn and this is the most important criteria in wealth creation. 


Increase Your Ability to Learn


Cultivate your powers to study and become wiser. When you are young, work to learn and acquire all the experiences and skills. Once you acquire all the experiences and skills, the pre-requisite of success is “DESIRE”. Have you ever come across someone who is not as capable or hardworking as yourself but earning much more than you?

This person probably know how to impress his boss with his work, and ask for more salary each year, while you work hard and suffer in silence without asking your manager for pay rise. When his job is stagnant, he actively seeks for more career advancement opportunity, while you are contented with your job. Although he does not possess ability to earn more but he had a strong desire to earn more which is extremely important.

Having the ability to earn more, means increased savings or investment amount. This can guarantee your financial freedom faster. As mention in my earlier blog, investing S$3k a month and compounding 8% return over 30 yrs give you S$4 million. The same investment with S$7k a month gives you S$10 million after 30 yrs.

The primary focus for young graduates should be increasing the ability to earn, follow by the knowledge and skills of investment – stocks or real estates. After-all your 20k portfolio will only earn you 2k each year for a 10% return, compare to a 200k portfolio giving 20k return. Having said that, if you are acquiring all the investment skills to be a fund manager later, then it is a different story as your skills and experience acquired now will greatly increase your ability to earn later in your career.

Refer to part 2 .......



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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


Thursday, 20 March 2014

Suntec REIT - Private Placements

Source: UOB KayHian Report

Suntec REIT has announced a private placement of 218m new units to raise gross proceeds of S$350m. Although management had indicated that the funds will be used to pare debt, we believe that an acquisition of a property in Singapore or Australia is forthcoming. 

Maintain BUY with a unchanged DDM-derived target price of S$2.12. (upside of +29% from today closing price of S$1.64)

WHAT'S NEW
■ Private placement to raise S$350m. Suntec REIT has announced a private placement of 218.069m new units at an issue price of S$1.605 per new unit to raise gross proceeds of S$350m. Net proceeds will amount to S$341m after fees. Lead managers and underwriters are DBS Bank, Standard Chartered and HSBC. The private placement has been fully subscribed.

■ Issue price at 3.5% discount to the VWAP of S$1.6839 per unit on 18 March, after adjusting for the advanced distribution. The new units will increase the number of units in issue by 9.6% from the 2,270.5m units in issue as at 31 Dec 13. The issue price is at the upper-end of the indicative S$1.575-1.615 range.

■ Estimated advanced distribution of 2.096 S cents for current unitholders for the period from 1 Jan 14 to 26 Mar 14, prior to the issue of new units. The next distribution will comprise Suntec REIT's distributable income from 27 Mar 2014 to 31 Mar 2014.

STOCK IMPACT
■ Proceeds used to pare debt for now. Suntec REIT has indicated that the proceeds will be used to repay debt facilities for now, which would bring the REIT’s gearing down to 33.8% from 38.0%. We estimate that if the proceeds are used to pare debt, our DPU estimates could be trimmed by 3.9-4.9% for 2014-16.

■ Acquisitions a more likely scenario. We believe that Suntec REIT will ultimately utilise the proceeds to capitalise on growth opportunities through acquisitions. This could include further acquisitions of Grade-A assets in Australia gateway cities including Sydney and Melbourne. In Singapore, Suntec REIT could potentially explore the acquisition of the Straits Trading Building (latest valuation: S$400m), or to further raise its stake in Suntec Convention Centre from its current 61%. The additional funds could also be used to finance a potential AEI at Park Mall.

■ Headroom of S$570m for acquisitions post the equity fund raising, if Suntec REIT were to maintain gearing levels at 38-40%. The additional headroom could also be utilised to partially finance Suntec REIT's S$482m acquisition of an upcoming office tower in Sydney.



Reits or Business Trusts?

Met up with friend today for dinner. I try to explain difference between Reits and Business Trusts, but somehow it is not very convincing. Here is link to explain in detail. 

Dividends


Most common reason to invest in Reits or Trusts is for the dividend return. Extracted herewith - "The attractiveness of Reits or Trusts lie in their ability to pay a regular and stable dividend. This is a big plus in a portfolio. Re-search into long-term returns shows that reinvested dividends comprise the bulk of returns, compared to capital appreciation."

The main difference explain as follows, although there are more differences as show in earlier link or as shown in the structure/table below. 

Trustee & Manager

Reit – assets are held by a trustee on unitholders’ behalf.  Separation of roles between trustee and the manager.  
Trusts – hybrid structure which trustee has legal ownership of trust assets and mange assets for unitholders’ benefit.

Leverage

Reits - gearing limit of 35 per cent. This can be raised to 60 per cent if the Reit obtains, discloses and maintains a credit rating from rating agencies. 
Trusts - no explicit cap on borrowings and may set their own limits. (not neccesary bad since have more flexibility in borrowing of funds to grow its business.)

Dividend distribution

Reits - Must distribute min. 90% of income to enjoy tax transparency under Income Tax Act.
Trusts - No requirement to distribute, but the trust may pledge to distribute a certain percentage of income as dividends. E.g. Croesus Retail Trust pledge 100% distribution for first 2 years after IPO last year.




Wednesday, 19 March 2014

Vallianz Holdings - More Growth to Come?

Vallianz Holdings, a subsidiary of Swiber had been growing exponentially since Sep last year from 5c to peak of 20c and now hovering around 15c. 300% increase! 

This counter had been stagnant under Anders Schau as CEO since 2010 to 2012 after the RTO from Enzer. Since the appointment of Darren Yeo, who is also director and a major shareholder in Swiber, the stock had pick up pace with several announcements including JV with Saudi Arabia Rawabi and option agreement with Swiber. FY2013 results showed a 88% increase in earnings to US$10.3M with a backlog order of US$470M. 


Announced appointment of Executive Director Ling Yong Wah yesterday. His background is from private equity firm which focused on expansion capital and mid-market buyouts. 

With the new appointment, will there be more expansion moves to come??? 


Positive
  • Strong fundamentals in offshore sector stem from more than 200 delivery of Jackups in coming years
  • Strong order book of >S$500M
  • To expand fleet of vessels from 26 to 50 by 2016.
  • Strong backing from Swiber who has extensive network in S.E.A, India, Middle East & Mexico assisting Vallianz to get more contracts.
  • Management has sufficient experience weathering through the 2008-09 crisis.
  • Management is young at average age below 50 years old.
  • Management has track record of growing a stock and sell it, as seen in Kruez Holdings.
  • ROE ~ 17%, ROA ~ 5%
Negative
  • High debt of US$69m. 54M is term loan for vessels. 
  • Current Ratio = 0.64
  • If another crisis like 2009 hit again, high debt asset owning nature business will be affected seriously
  • Pathetic low dividend of 0.3%
  • Expansion means hiring of experienced people, which is already scarce in the market.


Understand Yourself? - How to be Happy

Earlier post, I blog about who is Rolf Suey. Re-arranging the letters, it means “Yourself”

The meaning of life starts with first understanding yourself. Once you done that, start develop yourself and engage in life-long learning and try new things. Apart from yourself, your family, friends and people around you are often the main reason why you are happy or sad too. 

Now let’s take a look on how can “Rolf Suey” lead an enriching life.

Be Yourself

Many people live their lives not knowing who they really are. They often live in the shadow of others. During my school days, I know many friends who get into Computer engineering because their parents want them to be in computing since it has brighter prospects. They hated programming and eventually failed the course.

“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. Don’t let the noise of other’s opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.” – Steve Jobs


Love Yourself

To be yourself, you first have to learn how to love yourself. Only a person who can take care of themselves can take care of their family. Take care of your health. Quit smoking! I quit after 18 years, so can you. Start exercising and stay fit. I remember a friend 10 years elder told me when I was in my 20s, I will know what it is like to have a big belly when I hit 30, because I will never find time to exercise due to work and family commitments. I am mid 30s now, carrying all the commitments in work and family, still not knowing what it is like to carry a big belly around my waist!

The more you like yourself the less you are like anyone else, which makes you unique. – Walt Disney

Do what you love - Passion

Many people say passion is the most important attribute to be successful. It is absolutely correct. To excel in what you do, you have to preserve in what you do. In order to preserve and overcome challenges, you have to have a lot of passion. Have you ever wondered "Passion of Christ = Jesus = suffering on behalf of people"

Passion literally means “to suffer” in Latin. It is a term applied to a very strong feeling about a person or thing. Passion is an intense emotion compelling, enthusiasm, or desire for anything.

Never misuse Passion for Excuse. I remember I had a tuition student saying he wanted to be a postman so that he do not need to study hard then! He told me that working as a postman do not have stress and just need to deliver letters. Is it True? 

Passion has to make economical sense. In today's society, having passion is one thing, having a roof with bread and butter is another. It is nothing wrong to be a postman, it is an honorable job. But to be passionate about delivering letters in the "World Most Expensive City" may require more than just delivering letters to survive! Probably some kind of innovations to be the next Fedex or DHL will do the trick!

Passion has to be sustainable. Very often you will hear people say they have passion in one thing and few months or days later, he will tell you he found another new passion. It is wonderful when you aspire to be a sportsman, artist, chef, musician etc. but please make sure it is not an excuse to be escape the stress from schools, or an excuse to be lazy! 

You have to love what you do for many years or forever. It is not passion for 3 days, 3 months or even 3 years is considered too short. 

Passion = suffer? If you are 1.65m tall, to excel in playing basketball as a professional, you must be prepared to work doubly or ten times as hard as someone who stands at 1.95m or taller. Michael Jordan is deem to be short at 1.8m and never make it to the varsity team initially. To prove his worth, Jordan work rigorously got into varsity team and goes on to become the greatest NBA player ever. He also grew 10cm that summer in varsity too, probably as a reward god gave him for working hard!


Love What You Do – Develop Passion

If you are unable to find things you are passionate yet, "do not settle,  keep searching" - Steve Jobs. Very often if you have a positive mindset, passion can be developed. 

For example, when I started giving tuition, it is for the money and never for the passion. While juggling studies later work, relationship and tuition, it was tough. I preserve, and eventually develop a love in teaching, where I realize tuition is one of the most enriching and rewarding part time job. I enjoy every moment when I see my students pass their O levels with flying colors. 

In work, never once I imagine myself to be in sales, so I started as an engineer. It takes a strange incident to get me into sales. It turn out to be the best thing that happen to me. I love meeting new people and closing deals today. 

It is more a kind of passion developed over the course of work, rather than I know it from start.   

Set Goals

It is important to set goals, to enjoy the satisfaction of reaching the finishing line. Write down 10 goals in the next 12 months and circle the most important 3. For each goal, write down at least 20 answers to achieve that. Be specific. Take each answer and work on it repeatedly. Keep track on your activities too.

For instance “My Goal is to increase investment Portfolio by 30% in the next 12 months”  

My answers will be: save each month, re-invest earnings, never lose my capital, read business times daily, read annual reports of at least 3 new companies per week, at least 2 blog post on investment a week, read at least 1 investment book a month, meet with people working in the company of the stocks you are interested, visit the property or shopping malls that you are interested to invest etc

“If you want to live a happy life, tie it to a goal, not to people or things.” Albert Einstein

Try New Things

To make your life more exciting, try new things and break the routine. Go join some new courses, learn new language, and take up new hobbies! “Get out of your Comfort Zone!”  If you continue to try new things, you will be positive and forward looking in life. Very soon, you will discover all the new experiences that make you really happy rather than lazing at home to be a couch potato.   

Meet New People

Meeting new people or catching up with long lost friends brings new opportunity in life. You may even find your new best friend at the age of 50 or even 60. Also it may present new investment or career opportunities. Talking to people also increase your awareness and widens your knowledge on current affairs. Creative ideas are often generated from a conversation that can intrigue your thinking process.

Spend Quality Time with Family and Friends

Ultimately life is not only about career, it is about people you love and spending quality time with them.

“A man should never neglect his family for business.”- Walt Disney




Be Happy – It is in the mind

It is your mind that makes you happy and not necessary the things that makes you happy.

“Most folks are as happy as they make up their minds to be” – Abraham Lincoln

It is easier said than done, but if you truly understand yourself, know your goals in life, plan for it, work hard for it; you will definitely lead an enriching life. 

“Happiness depends on ourselves” – Aristole

Better Late Than Never

I will end with “Better Late than Never” to get started on all the above points today! 

Monday, 17 March 2014

Swissco – Share Price Tumbles 20%

Shares of Swissco go tumbling from 0.39 to 0.32 today, after I reported that it could be the next Ezion.

What happen?




In earlier blog it was already mentioned that Swissco will enter into Rig business. 
"End Feb Swissco announced that it will acquire Scott and English for S$285M from Double Dragon Energy. This is effectively an RTO from Tan Kim Seng to inject the Rig business into Swissco. With the acquisition, Swissco will undertake a share consolidation of 2-1. The consideration of 285M is satisfied by allotment and issuance of 452M shares or S$0.63."

This mean that 0.63 / 2 = S$0.315 at pre-consolidation. 

Hence 31.5c is the fair value pricing, which sent 39c tumbling down within a day. 

PE is 6.4x at 32c. BVPS = 31c, PB at 1.05x.  ROE at 16% and ROA at 8%. 

Competitors like Pac Radiance  and Jaya are all value at 10 and Marco Polo PE at 8. Ezion is at PE 15. Malaysian competitors such has average weighted PE > 30.

Price is at 35% discount to industry, with a good growth story coupled with its extensive networks mentioned in earlier blog, seems like it is time for Long position!!!



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Sunday, 16 March 2014

Singapore Oil and Gas Stocks - Win-Win Network for the Rich

In this post, let’s take a look at some offshore counters listed in SGX and how are they inter-connected to one another to make win-win businesses profiting among themselves. Below are some of them with their market cap in bracket.

Ezion (2.6B), Ezra (1.1B), Rex (673M), Triyards (188M), Swissco (170M), Loyz Energy (131M), Viking (111M) and former Labroy founders ( >1B)

Among these companies together with ex-Labroy founders' net worth, we are talking about S$6 billions or more of capital creating a network among themselves.



Couple with their extended network to local or global international oil and gas companies, basically we are looking at companies that can influence the Oil and Gas Stock market in Singapore or even regionally and globally.

Now, let us take a closer look on their inter-relationships.

Swissco - Ezion - Ezra – Triyards

In my post earlier, I mention about the relationship of Swissco and Ezion, with owner of Swissco Tan Kim Seng also a top 20 shareholder in Ezion. The founder and owner of Ezion, Chew Thiam Keng use to work for Tan Kim Seng as the MD of KS Energy when Tan is the chairman there.


Chew of Ezion go through an RTO of Nylect in 2007 together with a partner Lee Kian Soo. Lee, the current non-executive chairman of Ezion, is also the founder of Ezra Holdings and father of its current Group CEO, Lionel Lee.

Ezion will anticipate the market for potential charterers or buyers for liftboats or Rigs. Ezion then build all it’s liftboats and rigs in Ezra's Vietnam Triyards.

At the same time, Ezion’s rigs or liftboats will require offshore support vessels or subsea vessels, which they will charter from Ezra. The vessels from Ezra is normally higher-end vessels. In case they require lower-end vessels, Ezion can charter from his former chairman Tan Kim Seng's Swissco.

After Triyards deliver the Rigs to Ezion, Ezion can either bareboat charter it out, or if the project tender require crew onboard to operate, Swissco newly acquired Scott & English can takeover to operate the Rigs.

Loyz  – Rex – Ezion - Ezra
Aside from Rigs and Offshore support vessels, Ezra & Ezion is also closely related to Oil and Gas Exploration and Production (E&P) companies such as Loyz Energy and Rex Oil and Gas.

Loyz Energy is formerly known as Sim Siang Choon Ltd. Loyz’s current Managing Director is Adrian Lee. Adrian Lee is the brother of Lionel Lee – Ezra CEO and son of Lee Kian Soon. 

Loyz Energy is also partnering with another company Rex International to co-share production wells. Rex is listed in SGX. Both the companies had also signed cooperation agreement so that Loyz can use Rex proprietary technologies for exploration work.  

Swissco - Viking - Labroy - Former Ministers

Now let’s analyse the relationship of Swissco and Viking Offshore, another Catalist listed company together with an ex-SGX listed company Labroy Marine.


Viking offshore is owned by Andy Lim another industry veteran. Lim is the husband of first PAP female Minister Lim Hwee Hwa. Although she is no longer the minister, thanks to WP Aljunied's victory, her influence must not be underestimated.

Viking Offshore main business is Equipment supply for Offshore industry. Recently Viking also announced its recent involvement in Rig business partnering with Tan Boy Tee & Chan Kwan Bian to own and build rigs. Tan and Chan are founders of Labroy who sold it to Drydock World in 2007 for a whopping S$2.4 billions.

Tan Kim Seng (Swissco), Andy Lim (Viking), Tan Boy Tee (ex-Labroy) and Chew Hua Seng (founder of Raffles Education) are founders of Tembusu Partners in 2006, a private equity fund manager specialising in growth capital in oil and gas. At the same time former Minister Lim Hwee Hwa and Yeo Cheow Tong are directors of the company as well.

This makes Viking related to Swissco, Labroy and the Parliament.

Oil and Gas Value Chain

Let us see how these companies create businesses for one another in the O&G industry. First we have to understand the O&G value chain which I mentioned in my earlier blog.


Exploration & Production -> Rigs & FPSO -> Offshore Vessels –> Shipyards -> Major Equipment

Loyz Energy & Rex will explore and own oil wells. Once they discover oil, they will require Rigs to drill the oil wells, Offshore Construction & Subsea Vessels to construct the subsea network and support the Rigs, then finally FPSO to produce and process the oil. The flow goes like this.

Oil discover, Loyz or Rex charter:
  • Rigs from Ezion, Swissco or Viking
  • FPSOs from Ezra’s EMAS production
  • Subsea construction vessels from Ezra’s EMAS AMC
  • Offshore support vessels from Ezra’s EMAS Marine or Swissco
Ezion & Ezra:
  • built the vessels in Ezra's Triyards who own shipbuilding yards in Vietnam.
Vessels under-construction in Triyards will then purchase major offshore equipment from Viking subsidiary as below. Similarly for Viking or Swissco's own Rigs.
  • Viking's Marshal who supply Rig electrical systems
  • Viking AirTech who supply Rig HVAC systems
  • Viking's Promoter who supply Rig deck equipment.
Now we see how the rich are creating business for each other, building a big network of support and benefiting each other.

Each contracts they award are in tens and hundreds of millions. A Jack up Rig typically cost USD150-250M while Liftboats cost USD60-70M to built.
Day charter rates for Rigs is USD50-200K while Liftboat day charter rate can be approx. USD80k.

Games for the Rich

Now we see how the rich are creating businesses for each other, building a big network of support and benefiting each other.


Now you know why 90% of the wealth is always controlled by 10% of the people. Me and you can most probably be one of the 90% who donate our money to those 10% rich. No wonder the rich gets richer and richer, and the poor gets poorer and poorer.

Nevertheless if we try to understand the Oil and Gas Industry and their businesses, then applying our little knowledge of Fundamental and Technical Analysis, hopefully we can be one small group within the 90% investors who can have a small bite of the cake!


Related Posts:
Swissco - The next Ezion

Saturday, 15 March 2014

Swissco - The next Ezion

Few days back, I was with a veteran in the market who use to be an MD of a listed entity in the oil and gas industry. We have a small chat on Swissco Holdings, an Offshore Service Provider who recently announced that they had entered Rig Chartering Business by acquiring Scott & English Energy. See here.



Swissco has a market cap of 179M with share price of 39c. Its share price had been rising from 23c in Sep last year to a peak of 40c now.




I was told that Swissco can be the next Ezion.

Ezion is mainboard listed with a market cap of 2.6B. Ezion was RTO from Nylect end of 2007 and hit its low in 2009 at 10c. Since then Ezion share price rocketed more than 20x to S$2.10 today. Imagine your 10k then, can become 200k within less than 7 years.

Can Swissco be the next Ezion?

Let us take a close look on who owns Swissco, the track records and how it is related to Ezion.

Swissco
RTO from C20 Holdings and is majority owned by Tan Kim Seng, a veteran in the O&G industry. Tan was the founder of another listed O&G company, KS Energy. The company was initially called KS Tech and IPO in 1999 at 23c. In 2006, Tan sold his stake of KS to Indonesian tycoon Kris Wiluan for S$181m (30% stake) at S$3.05 per share i.e. 13x within 7 years. Since then, KS had been doing badly seeing "red" in profit and stock price had drop to current 43c.

Swissco's relation with Ezion
Chew Thiam Keng is the owner of Ezion. He use to work as the MD of KS Energy when Tan Kim Seng is the Chairman.

Now with Ezion churning out rigs, and Swissco having the new Rig Chartering business, it is quite certain that Ezion who build rigs and liftboats will sell them or bareboat charter them to Swissco. Swissco will in turn own or operate the Rigs for Mexico and China region, where Tan has extensive contact and relationship. Now the demand for Rigs are particularly high in these two regions.

Please also note that Tan Kim Seng is one of the top 20 shareholders in Ezion. That makes it a win-win situation for him.

Swissco can also utilise its own fleet of Offshore vessels to support its own Rig businesses.

Things are indeed looking bright for Swissco. If there is no major crisis, they can well be the second Ezion.

As for me, I am still hesitant to buy in.

The reason is because I bought Swissco in 2010 at 32c and sold at 38c recently earning meagre profit keeping the stock for 3 years. It is trading at 39c now which is expensive. Lets wait for it to drop!