Bakertech

Bakertech: OSK DMG met up with the mgt team of Baker Tech and came away with a positive view on the grp’s strategic plans. In the mid-term, Baker Tech plans expansion into rig ownership through Discovery Offshore (20%), which will drive EPS growth in FY13-14F. DISC could be eyeing more rigs and Bakertech might continue to raise its stake in DISC. BTL has two distinct business units: i) Sea Deep Shipyard, a wholly owned subsidiary, is involved in the manufacturing of specialised equipments for offshore assets; and ii) 20.16% stake in DISC, a pure play rig owner listed in Oslo. DISC has two KFELS A Class rigs under construction, which are expected to be delivered in Jul 2013 and Oct 2013. Bakertech is looking to expand its existing rig component business with a view to carry out on-site upgrade/maintenance work. With a cash balance of $99m (post div), BTL could also raise its stake in Discovery Offshore, allowing the co to add more rigs to its existing fleet of two units. As the jackup market is tight, believe DISC could easily secure charters for the two KFELS Super A Class rigs before they are delivered. House estimate that each jackup rig can generate an annual net profit of US$24m to DISC. BTL’s 20% stake allows them to recognised US$4.8m (S$6m) per rig p.a.