EKUITI Nasional Bhd's first spinoff, Icon Offshore Bhd, en route to a listing on Bursa Malaysia's Main Market on June 25, aims to raise about RM1 billion through its initial public offering (IPO). Ekuinas, which was mandated in 2009 to invest in Bumiputera companies to build up their capacity, had invested in two Bumiputera OSV companies, namely Tanjung Kapal Services Sdn Bhd and Omni Petromaritime Sdn Bhd, before merging them to create Icon Offshore in 2012.
As at April 30, the company boasts of 32 vessels available for charter and operating in waters off Malaysia, Thailand and Qatar. The company plans to add seven more vessels to its fleet by year-end. According to the prospectus, Icon Offshore owns one of the youngest fleet in the region with an average age of five years, versus the Southeast Asia average of 11 years. In Icon Offshore’s case, 90% of its fleet is serving out three to five year retainer contracts, providing a buffer to swings in the market.
The bulk of its fleet is locked into time charters, which typically last 12 months or longer. Its average utilisation has dipped from 88% in 2011 to 84% last year.
Some 70% of its jobs come from Petronas, which the firm is hoping to reduce by expanding into the region.
At an indicative initial public offering (IPO) price of RM1.85 a share, the oil and gas support services provider will be listed at a price-to-earnings multiple (PE) of 18 to 19 times its estimated 2014 earnings – a premium over the sector average of 13 times.
Its peers such as Perdana Petroleum Bhd and Alam Maritim Resources Bhd are currently trading at 13 times their forecast earnings this year, and between 11 and 12 times their expected profit in 2015, Bloomberg data showed.
On a historical basis, the listing price is a steep 24 times the company's earnings per share of 7.61 sen last year. Its 2015 valuations are more reasonable at 13 to 15 times earnings.
At these levels, the offshore support vessel (OSV) owner-operator is commanding valuations that are closer to the large cap, integrated players like Bumi Armada Bhd and SapuraKencana Petroleum Bhd.
Its debt load, which is a staggering RM1.1bil, will shrink to RM743.65mil once some of it is paid off with the listing proceeds.
The company's net gearing ratio of 2.78 times will also drop to 0.65 times post-IPO. Notably, its current borrowings are more than double its firm orderbook of RM502.4mil.
Icon Offshore’s total orderbook, inclusive of optional extensions, is valued at RM700.1mil.
The firm posted net profit and sales of RM89.57mil and RM334.86mil last year. Its profit after tax margin had improved to 26.7% as at last year from 19.6% in 2011.
Icon Offshore is expected to match its historical growth rates of double-digit growth, says Jamal.
Its net profit and revenue jumped by a compound annual growth rate of 41.9% and 21.6%, respectively, in the three-year period up to 2013.
