Kim Heng

Kim Heng: Philip initiates at Buy with TP $0.33, based on 11x FY14 P/E, in line with the small/mid cap O&M players. . The house likes Kim Heng for its asset light business model, by nature of it being in the services industry. Gross profit margins and net margins are high , resulting in superior returns on equity and invested capital, which can be attributed to cost mgt discipline and being an "all-in-one" service provider to the top rig owners. Operating and free cash flows has been robust and positive since FY10, once the capex cycle is over, and the house expects it to expand rapidly, signalling good potential for increasing shareholder returns. Meanwhile, Kim Heng will be enhancing their yard facilities and expanding their fleet as it ramps up capex with the IPO proceeds. Kim Heng has indicated plans to expand its subsea capabilities and could potentially acquire a subsea service contractor.