SBI Offshore

SBI Offshore: Races to a 52-week high, after the group announced that it has secured a US$24m contract from a Middle East-Chinese Consortium, to provide design and engineering services for a jack-up drilling rig. Work is expected to commence during 2H14 and the contract is expected to contribute positively to the group’s financial performance in FY14 and FY15. The project is in line with the group’s strategy to offer value-added engineering solutions and drilling equipment for the oil and gas industry. Commenting on the contract win, SBI Offshore highlights that the design and engineering contract is significant as it underscores the group’s ability to move up the value chain and secure higher-value projects in new markets. SBI Offshore recently posted 1H14 net profit of US$0.4m (+10%), despite a 75% drop in revenue to US$7.9m. The drop in revenue was largely attributable to an 87% drop in projects revenue to US$3.5m, due to the bulk of revenue being recognised from an Engineering, Procurement, Construction and Commissioning (EPCC) project for an Asian client in 1H13. Bottom-line was however aided by jump in gross margins to 28.8% from 5.4%, mainly due higher margins recognised from projects undertaken in 1HFY14 and from the distribution segment. Going forward, with escalating operational costs and cut-throat competition within the industry, SBI Offshore recognises the need to carve a competitive edge for itself among the increasing number of offshore and marine players who can provide end-to-end solutions. Towards this end, the group had also on 2nd Jul ‘14 announced its intention to form a joint venture (JV) with US based oilfield equipment provider. The partnership will increase the group’s suite of capabilities to include products and services for onshore and offshore drilling. SBI Offshore currently trades at 18.6x trailing P/E and 1.38x P/B.