SAC Capital analyst Lim Shu Rong is positive on Jason Marine Group in an unrated report, highlighting that customer enquiries and projects have picked up post-economic reopening.
In the report dated July 8, the analyst noted that Jason Marine’s FY2022 ended March revenue was up 3% y-o-y at $30.9 million, and although its net profits were down 23% y-o-y at $200,000, this was largely due to a $1.2 million decrease in government grants and a one off termination payment of $500,000 in FY2021. Government support ceases in FY2023.
Despite the decrease in net profits, local output of marine and offshore engineering work in April has risen 27.6% y-o-y and 18.3% from January to April, with higher crude oil prices, increased shipbuilding order books and travel restrictions easing serving as tailwinds for the sector.
“We believe the group’s order intake could return to pre-pandemic level. The group has established an office in Italy which will better position them to enter the EU market and expand their outreach to EU customers,” writes Lim.
“Vessel owners are also placing more importance on cybersecurity, prompting more upgrades and replacements to their navigation and communication systems. This trend is likely to benefit the group as well,” adds the analyst.
Lim also notes that like other project engineering companies, Jason Marine faces execution challenges from component and equipment shortages which could delay revenue recognition and risk cost overrun. Jason Marine reflected a 7% decrease for project-based revenue for FY2022, as equipment shortages hampered the progress of its projects.
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“Nevertheless, these shortages are short-term concerns and likely to ease as chip capacities redistribute following a slowdown in consumer electronics demand. In view of market uncertainty and volatility, the group has drawn down a $5 million loan solely for working capital needs. The loan is fixed at 2 to 2.5% per annum over a 5-year tenure,” the analyst says.
According to Lim, Jason Marine maintains a sound and healthy balance sheet with a net cash balance of $14.7 million as at March 2022, or 14 cents per share. Its net cash represents around 89% of its market cap.
The group has proposed a dividend of 1 cent per share for FY2022, up from 0.75 cents per share in FY2021, which translates to a dividend yield of 6.3%. The stockis currently trading below book value at P/B of 0.7x. As at 11.52am, shares in Jason Marine are trading about 3.1% lower at 16 cents.
