Beng Kuang

 

 

 

Oiltek has had a stellar run, and others that have outperformed include Wee Hur and Beng Kuang

 

Singapore shares have had a very good year, as they outperformed many of their regional peers.

 

That performance has mostly been on the back of heavyweights such as the three banks, which soared to record highs. The benchmark Straits Times Index (STI) surged to a 17-year high on Nov 8.

 

The most-traded stocks on the STI so far this year include DBS : D05 +0.02%, UOB : U11 -0.22%, OCBC : O39 +0.18%, Singtel : Z74 +0.32% as well as Seatrium : 5E2 +0.49%, based on data from the Singapore Exchange (SGX). The top 100 most-traded stocks had total returns of 11 per cent in the first five months of the second half of 2024, indicated SGX.

 

&ldquo Comparatively broader gains across local manufacturing stocks, real estate investment trusts, in addition to adjacent Asean stocks, have seen the STI extend its 5.7 per cent total return in H1 2024 by 15.4 per cent in the first five months of H2 2024, bringing the 11-month total return to 21.9 per cent,&rdquo said SGX in a Dec 9 note. 

 

&ldquo This has also coincided with stronger economic momentum in both Singapore and the Asean region,&rdquo it added.

 

But what are some of the stocks which have surged this year that may have fallen under the radar?

 

Here are three of them &ndash including one that soared more than 300 per cent &ndash and recent developments surrounding the companies.

 

Wee Hur

This stock jumped around 117 per cent in the year to date to S$0.425, as at Friday&rsquo s (Dec 27) close.

 

The company said on Dec 16 that it sold its student accommodation assets in Australia for A$1.6 billion (S$1.4 billion).

 

Before that, however, its shares had already rallied on talk of this potential sale.

 

Wee Hur : E3B -1.16% will receive proceeds of about S$320 million from the sale, pending shareholders&rsquo consent and regulatory approvals. It expects the transaction to be completed in the first half of 2025.

 

It plans to reinvest proceeds into existing businesses or explore high-growth areas.

 

Wee Hur was also the second-strongest performer of the 100 most-traded stocks in the first five months of H2 2024, indicated SGX.

 

Oiltek

This vegetable and edible oil engineering process company has rocketed about 373 per cent in the year to date to S$1.04, as at Friday&rsquo s close.

 

Analysts this month issued a &ldquo buy&rdquo call on the stock given Oiltek&rsquo s strong order book and increasing demand for sustainable aviation fuel.

 

The Catalist-listed renewable energy solutions provider announced on Dec 23 that its wholly owned subsidiary, Oiltek Sdn Bhd, has secured additional new contracts from Malaysia worth around RM9.2 million (S$2.8 million). That added to a string of new contracts it has bagged this year.

 

With these new contracts, the group&rsquo s current order book amounts to about RM391.1 million and is expected to be fulfilled over the next 18 to 24 months, Oiltek said.

 

In a December note, UOB Kay Hian analysts set a target price of S$1.22 for the stock. They noted that Oiltek was trading at 15 times based on their FY2025 estimates &ndash a discount of about 25 per cent compared with its peers&rsquo average of 21 times.

 

The growing importance of sustainable aviation fuel will drive up demand for services offered by Oiltek, and could lead to more contract wins for the company, the analysts added.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On Oct 24, the Ginko-AGT Global Growth Fund reduced its substantial shareholding in Beng Kuang Marine : BEZ -4.17% from 7.13 per cent to 5.58 per cent by selling three million shares at an average price of S$0.251 per share.

 

Previously, on Jun 6, the fund had increased its stake in the group to more than 7 per cent, acquiring shares at an average price of S$0.181 apiece.

 

The rotation followed Beng Kuang Marine&rsquo s announcement last month that it would be removed from the SGX watch list with effect from Oct 15. Back in August, when it reported its results for its first half ended Jun 30, the group highlighted that it showed improved operating performance over the past four consecutive quarters, marking a financial turnaround from Q2 FY2023 (excluding a one-time gain on disposal).

 

Specifically, its profit attributable to shareholders reached S$8.57 million in H1 FY2024, a significant improvement compared to the net loss of S$0.85 million in H1 FY2023.

 

The Ginko-AGT Global Growth Fund was launched in February 2019. AGT Partners maintains three investment strategies: long-term investments, short-term active trading, and a quant-driven multi-factor strategy.

 

The fund manager maintains that the long-term, concentrated investments account for about 75 per cent of the fund&rsquo s assets under management (AUM). This strategy focuses on businesses with competitive advantages to maximise potential durable earnings power, prioritising certainty of earnings over speculative opportunities.

 

Going into 2024, the fund manager highlighted key competitive advantage considerations including network economics, high switching costs, lowest-cost production, favourable locations, and valuable intangibles such as branding, patents, and regulatory requirements.

 

The strategy also targets companies that can reinvest earnings at reasonable rates of return for continued growth. The fund managers also said that effective capital allocation by management, including share repurchases and dividends, is an important consideration with investments made at reasonable valuations, often using the price-to-earnings multiple.

 

AGT Partners said that the short-term active trading strategy represents around 20 per cent of the fund&rsquo s AUM, while the quant-driven multi-factor strategy makes up about 5 per cent.

 

With the aim to double its net asset value every four years, averaging around 20 per cent per annum, the fund has consistently attracted investors since 2023, when it opened to external accredited investors.

 

Having delivered a compound annual growth rate of more than 40 per cent since its inception, the fund intends to continue building on its current track record and focus on compounding the wealth of its investors at a good rate over the long term.

 

 

 

 

 

 

 

 

 

After a long career in banking, Yong Jiunn Run, former head of commercial banking at CIMB Singapore, retired early at 58 due to job loss during the Covid-19 pandemic. Despite having ample free time, he felt unfulfilled by golf and socialising with other retirees. Seeking a more meaningful pursuit, Yong accepted an offer from Chua Beng Yong, chairman and founder of Beng Kuang Marine BEZ 0.00% , to become the company&rsquo s CEO. &ldquo I lent money to the company and even took up shares to prove my commitment. I took a risk,&rdquo Yong says in a recent interview with The Edge Singapore.

 

Since Yong became CEO in 2021, he has markedly transformed the company and boosted its performance. Starting this year, shares in Beng Kuang have nearly doubled to 26 cents. Although they remain below the 2009 peak of $1.52, Yong&rsquo s hard work to transform the company is evident and he is focused on further improving its financial resilience.

 

&ldquo When I came in, I conducted a culture transformation to optimise talent. I created a lot of leaders, so there will be more accountability. I turned every business unit into a performance-based reward. I saw morale transformed,&rdquo says Yong, who adds that he is a strong believer in employee engagement and that the company&rsquo s success should be attributed to the support of the employees. &ldquo If the employees are happy, they will stay and strive.&rdquo

 

Yong&rsquo s &ldquo corporatisation&rdquo approach, influenced by his banking background, emphasises rewarding employees generously during company successes. This strategy aims to retain talent and drive transformation, helping the company stay competitive.

 

Founded in 1994, Beng Kuang is celebrating its 30th anniversary this year. Listed on the Singapore Exchange S68 0.61% (SGX) in 2007, the company has faced challenges like fluctuating oil prices and the pandemic. Under Yong&rsquo s leadership, Beng Kuang has streamlined its operations by cutting its business divisions from three to two.

 

Today, Beng Kuang is the leading provider of corrosion prevention services to shipyards in Singapore. Given the significant corrosion challenges posed by seawater&rsquo s high salt content, these services are essential for cutting maintenance costs and prolonging the service life of vessels.

 

The company provides comprehensive corrosion protection services for the marine and offshore energy sectors, including surface preparation and protective coatings. Its strong track record has made it the preferred contractor for several prominent shipyards in Singapore and Batam, Indonesia. Additionally, in its infrastructure engineering division, Beng Kuang offers services such as repairing and maintaining floating production platforms, fabricating marine structures and producing custom pedestal cranes and deck equipment.

 

The infrastructure engineering division also handles complex engineering and construction projects, including semi-submersible barges, patrol vessels, crane barges, tug boats and cargo barges. The company operates a 13.8ha yard on the eastern side of Batam, a portion of the 32.8ha acquired in 2007 for $1.87 million. Although Yong initially aimed to develop a shipping arm, the business faced challenges due to the oil and gas downturn and insufficient scale, leading to its eventual closure and the sale of most of the land.

 

Since then, the company has not only streamlined its businesses but disposed off loss-making ones too, as it transitions into a new era. Yong says: &ldquo Several businesses, such as the livestock carrier one, were bleeding and cost-inefficient. They could not create value and there was no chance for Beng Kuang to emerge as a key player in the market, be competitive and make a difference.&rdquo

 

Yong is committed to revitalising Beng Kuang and removing it from the SGX Watch-list, where it was placed in June 2023 due to three years of financial losses. However, signs of recovery are already visible &mdash in FY2023 ended December 2023, Beng Kuang reported a $3.4 million profit, reversing the $8.6 million loss from the previous year. Additionally, the company no longer incurs losses from discontinued operations.

 

The stronger bottom line resulted from revenue increasing by 33.9% y-o-y to $79.2 million due to growth in both business divisions. The infrastructure engineering division saw the largest revenue increase, up 4% y-o-y to $57 million. This growth is primarily due to expanded business in the oil and gas sector, particularly in repairs and maintenance for floating, production, storage and offloading (FPSO) and floating, storage and offloading (FSO) units. Additionally, there was an increase in project management services for both existing and new builds.

 

Yong envisions this division becoming more service-oriented and asset-light, with the Batam yard as its sole asset. &ldquo Being asset-light will help the company be more nimble and agile. If the industry turns, it will be easier for us to extricate and rebound. We won&rsquo t suffer like we did during the pandemic and the oil and gas downturn,&rdquo he adds.

 

Revenue from the corrosion prevention division, which is mostly recurring, rose 9% to $22 million. Although demand for services in Singapore decreased in the second half of FY2023, a significant revenue increase from Batam operations offset this.

 

Despite challenges, Beng Kuang survived when many competitors did not. Yong points out that the pandemic led to the closure of several rivals, creating a favourable opportunity for Beng Kuang to capture a larger market share.

 

Still, Yong remains cautiously optimistic. &ldquo Although we are positive now, it doesn&rsquo t mean that it is sustainable. We need to seek out and build new revenue engines. We have to remain capex light and we will not &lsquo buy&rsquo our profit anymore.&rdquo

 

Shareholders have recognised Beng Kuang&rsquo s efforts, especially with the company&rsquo s shares doubling from the beginning of the year to the end of July. The most recent 1HFY2024 results are even more encouraging. Profit after tax reached $8.6 million, a turnaround from a loss of $854,000 the previous year. Revenue also surged 88.1% y-o-y to $59.9 million.

 

The revenue growth was driven by the infrastructure engineering division, which continues to be the main revenue contributor, increasing by 141.7% y-o-y to $50.11 million and accounting for 83.6% of total revenue. This growth was partially offset by an 11.5% y-o-y decline in the corrosion prevention division, which generated $8.2 million due to the company&rsquo s exit from the water distribution business. 1HFY2024 also saw the gross profit margin increase by 9.2 percentage points to 35.5%, which helped gross profit surge by 153.4% to $21.3 million.

 

Beng Kuang has proposed issuing three-year bonus warrants to reward shareholders for loyalty. Shareholders will receive three warrants for every 10 existing shares they hold. Each warrant will allow the purchase of one new ordinary share at an exercise price of 22 cents during the exercise period.

 

Maybank Securities analyst Jarick Seet remains optimistic about Beng Kuang, maintaining his &ldquo buy&rdquo recommendation but adjusting his target price to 29 cents from 47 cents. Although core earnings fell short due to higher-than-expected administrative expenses, Seet is encouraged by the FPSO upcycle and a promising 2HFY2024. He also sees potential in a possible Batam island sale, as the group looks to become more asset-light.

 

This outlook aligns with the company&rsquo s broader strategy, including its growth plan &ldquo BKM 2.0,&rdquo which aims to strengthen operations and financial resilience to seize future opportunities. Yong underscores this approach: &ldquo We don&rsquo t want to miss the boat again, even though we build boats. We want to be on board and ride it.&rdquo

 

Beng Kuang Marine on Aug 5 announced its 1HFY2024 ended June results, which saw the group clock in earnings of $8.6 million, turning around from a loss of $854,000 in the same period a year ago. While this was mainly thanks to a one-off gain from a partial land sale amounting to $5.53 million, the group&rsquo s revenue did show some promising growth of 88.1% y-o-y to $59.9 million.

 

The revenue growth was thanks to the group&rsquo s infrastructure engineering division, which saw strong growth of 141.7% y-o-y to $50.1 million, accounting for 83.6% of overall revenue. This was mainly due to the strong performance by its 51%-owned subsidiary ASOM.

 

This growth was partially offset by an 11.5% y-o-y decline in the corrosion prevention division, which generated $8.2 million due to the company' s exit from the water distribution business. 1HFY2024 also saw the gross profit margin increase by 9.2 percentage points to 35.5%, which helped gross profit surge by 153.4% to $21.3 million.

 

&ldquo Our progress reflects the turnaround strategy we have been re-engineering since 2021, and our steadfast commitment to strengthening our value propositions and achieving durable results. Guided by our 2.0 business model, together with further targeted business development, we are building a stronger foundation to expand our value propositions and increase our operational scale globally,&rdquo says Beng Kuang&rsquo s CEO Yong Jiunn Run, who has recently joined the company and initiated a business restructuring.

 

To reward shareholders, the group had also proposed bonus issue of three year warrants on the basis of three bonus warrants for every 10 existing ordinary shares, where each bonus warrant shall carry the right to subscribe for one new ordinary share at the exercise price of 22 cents during the exercise period.

 

Following the results announcement, Maybank Securities is keeping its &ldquo buy&rdquo recommendation on Beng Kuang Marine BEZ -14.58% , but with a lower target price of 29 cents from 47 cents previously, this was due to the group&rsquo s core earnings for 1HFY2024 coming in below expectations due to much higher-than-expected admin expenses, which surged 72% y-o-y to $11 million.

 

Despite that, analyst Jarick Seet remains bullish on the counter. &ldquo We expect 2H2FY2024 to likely replicate or perform even better than 1HFY2024 due to the robust tailwind in the FPSO sector. However, much higher than expected admin expenses hampered operating margins, but we believe this will improve going forward.&rdquo

 

&ldquo While we remain bullish on the FPSO market and ASOM as it recorded a strong performance, the warrants dilution has put a cap on its share price upside for FY2024,&rdquo says Seet, while noting that total net proceeds from the warrants issue could amount to $13.02 million.

 

Seet is cautiously optimistic and will continue to review the group&rsquo s cost control measures and core earnings performance going forward and make any necessary adjustments.