The offshore and marine industry is witnessing renewed interest, driven by the increased demand for services that support the energy sector. Beng Kuang Marine Limited (“BKM” in short) is a company riding this wave of industry growth.
In 2021, ex-banker Yong Jiunn Run was appointed as CEO and it kick started BKM’s turnaround strategy that saw renewed focus on core capabilities and significant deleveraging. In addition, BKM was progressively positioned as service-centric, asset-light provider within the marine and offshore engineering space.
With and a clear growth strategy under the BKM 2.0 transformation plan, the company’s 3Q2024 performance further underscores its path toward sustainable expansion.
In line with this growth, BKM recently proposed a bonus issue of warrants, giving shareholders additional participation in its future prospects. Here’s an in-depth look into the company’s business model and financial performance to understand why it may be worth a closer look.
About Beng Kuang Marine
Founded in 1994, Beng Kuang Marine has steadily evolved from traditional shipbuilding to a fully integrated marine solutions provider, serving the broader energy and offshore sectors.
The company has transitioned to an asset-light, service-oriented business model, underpinned by its two core business divisions: Infrastructure Engineering (IE) and Corrosion Prevention (CP). This transition aligns with the company’s BKM 2.0 strategy, which is focused on sustainable growth, operational efficiency, and asset monetization.
Headquartered in Singapore, BKM operates strategically in the FPSO and offshore maintenance markets, catering to an array of global clients. Through its IE division, BKM offers asset integrity solutions that have gained significant growth momentum with the increasing demand for FPSO new builds and maintenance. Its CP division, meanwhile, provides comprehensive corrosion prevention services, enhancing the lifespan of offshore assets. With these capabilities, BKM is solidifying its presence as a leading service provider in the offshore industry.
Remarkable 9M2024 Financial Performance
BKM delivered impressive growth in 9M2024, with revenue climbing 62.8% year-on-year to S$86.69 million, underpinned by strong demand for asset integrity solutions supporting FPSOs and FSOs in onshore and offshore markets.
Gross profit soared 91.7% to S$30.73 million during the same period, reflecting the success of cost control measures implemented as part of the BKM 2.0 strategy. As a testament to its ongoing financial stability, BKM generated S$7.41 million in net cash from operating activities, enhancing its balance sheet to a net cash position.
Commenting on the 3Q2024 results, Mr Yong Jiunn Run, Chief Executive Officer of Beng Kuang Group, said:
“We have regained our momentum towards profitability, fueled by robust revenue growth. Our unwavering focus remains on delivering exceptional service quality, operational efficiency, and value creation which are essential drivers in today’s fast evolving market. Looking ahead, we are dedicated to upholding operational excellence and nurturing strong relationships with clients and partners. The return to profitability showcases our resilience and positions us for future growth and success.”
Strong Growth Prospects
The IE division is the cornerstone of BKM’s growth, particularly as demand for FPSO-related services surges globally for both onshore (new builds) and offshore (repair and maintenance) markets. Notably, the FPSO market, essential to the offshore oil and gas industry, is projected to grow rapidly, with BKM’s revenues expected to reflect this positive trajectory.
Source: Maybank Research as of 8 July 2024
According to an analyst report from Maybank Securities, it estimates a 51% CAGR for BKM’s profits from FY23 to FY27, attributed to the strong growth expected from its BKM’s subsidiary ASOM’s division in the FPSO space.
The company is also exploring potential opportunities in module fabrication to further diversify revenue streams, with plans to leverage its Batam yard facilities for this purpose.
In addition, the CP division remains a stable source of recurring revenue for the firm as they have established a solid track record serving blue-chip customers in the marine and offshore sectors.
Although CP revenue experienced a slight dip in 3Q2024 compared to the past year due to the exit of a non-core business segment, the division continues to contribute meaningfully to BKM’s financial performance.
This division is expected to benefit from sustained demand for corrosion prevention, a critical requirement in maintaining the integrity and performance of offshore structures (that includes renewables as well).
Rewarding Shareholders through a Proposed Bonus Warrants Issue
BKM recently announced a proposed bonus issue of warrants, offering 3 bonus warrants for every 10 existing shares. Each warrant allows shareholders the right to subscribe to one new share at an exercise price of S$0.22 over a three-year period.
This initiative is designed to reward shareholders while also positioning the company to raise capital in the future if these warrants are exercised. This move is in line with BKM’s strategic aim to enhance shareholder engagement and create opportunities for existing shareholders to participate in its growth journey.
Mr Yong Jiunn Run, Chief Executive Officer of Beng Kuang Group, is upbeat about this corporate action and commented:
“Given free to shareholders, the proposed bonus warrants issue is to reward shareholders for their loyalty and support in the Group. Furthermore, the proposed bonus warrants are priced at a discount so that shareholders can further benefit from any potential appreciation of the price of our shares and warrants ahead.
With our enhanced business model, we believe that the proposed bonus warrants issue will also provide shareholders with the added opportunity to participate in the future growth of the Company.”
Cheap Valuation compared to Industry Peers
Source: Maybank Research as of 8 July 2024
In terms of valuation, BKM trades at a forward FY2024 P/E multiple of approximately 4.5x based on a share price of S$0.23, significantly below its industry peers who trade at an average multiple of 12.2x.
The company’s asset-light and service-oriented business model, coupled with steady cash flow and strong fundamentals, positions it attractively compared to its local and regional competitors.
Moreover, the company has made a one-off gain of S$5.5 million from the partial disposal of its Batam property, bolstering its balance sheet and presents the potential for dividends payout ahead.
Conclusion
The growing demand for FPSO new builds and maintenance, coupled with a lean, service-centric model, has set the company on a promising growth path.
The company’s strategic Beng Kuang Group 2.0 framework emphasizes asset-light operations and recurring revenue streams, which aligns well with the marine and offshore industry’s long-term needs.
Last but not least, Beng Kuang Marine’s recent positive financial results, strengthened balance sheet and attractive valuation suggests that the company may offer a compelling case for investors looking to capture value in the marine and offshore services sector.
