SINGAPORE (Feb 22): Baker Technology has not been spared from the weakness facing the oil and gas industry.
A provider of specialised equipment and engineering solutions to oil companies and rig builders, Baker Tech sank to a net loss of $1.5 million in 3Q on the back of a 10% decline in revenue.
It has announced that it is also expected to report a net loss in the fourth quarter and full year results due to impairment of goodwill in a subsidiary on top of the tough market conditions.
(See Baker Tech sinks to loss of $1.5 mil in 3Q)
Yet, CIMB lead analyst Cezzane See believes Baker Tech’s strong cash position stands it in good stead amid the O&G slump.
In an unrated report on Tuesday, See notes that the company had established a subsidiary in 2013 to focus on exploring business opportunities through acquisitions and strategic alliances.
“We believe the current dire market conditions, present ample opportunities for healthy companies to pick up assets or businesses at attractive prices,” See says.
According to See, Baker Tech had a cash position of $111.7 million as at 9MFY16, which is equivalent to 83.4% of its market cap.
In addition, the company is likely to be boosted by the scheduled completion of a new asset.
According to See, Baker Tech in 2014 had commenced construction of a liftboat designed by its wholly-owned subsidiary.
The liftboat was scheduled to be completed by 2H16. Baker Tech in its 1H14 results briefing had mentioned that it was considering sale, or ownership and charter, of the asset.
“For reference, in Nov 2015, Atlantic Navigation announced a US$56m liftboat acquisition from China,” says See.
Should Baker Tech decide to own and charter the liftboat, See notes that another company, Gulf Marines Services, had stated recent average daily charter rates of close to US$37,000 to US$69,000 per day, dependent on vessel size.
In addition, See says liftboat operators such as Ezion and GMS had most recently reported net margins ranging between 13% and 25%.
Based on its trading price as at Feb 21, See says Baker Tech’s 9MFY16 P/BV of 0.61x is close to one standard deviation below its 2-year historical average of 0.63x.
As at 12.33pm, Baker Technology is trading flat at 66 cents.
