NauticAWT Limited ("Nautic" or the "Company") is a Singapore headquartered firm offering subsurface, subsea and surface facilities engineering services and contracting solutions for field exploration, development and refurbishments.
The Company has 11 offices across the world and provide a range of solutions for the oil and gas industry.
The Company is offering 28m shares at $0.20 each for a listing on Catalist where 1m is through Public Offering and the balance via Placement. The market cap is around S$37.8m. The IPO will close on 21 July at 12pm and start trading on 23 July 2015.
I like the revenue and profit growth trajectory. According to the prospectus, the Company has an order book of US$34.6m and intends to pay 20% of its profit after tax attributable to the owners of the Company as dividend from FY2015 to FY2017.
Looking at the proforma where the acquisition of AWT is included, the revenue is about US$45m and net profit is around US$4.2m (not very accretive) and the EPS went down to Singapore 2.87 cents.Based on the IPO price of 20c, the historical PER is around 6.97x
Use of proceeds
The Company intends to use the IPO proceeds to invest in new capital equipment and is spending $2m on professional fees! :(
The above is the growth strategy. It's for you to evaluate if they sound reasonable!
The shareholding are tightly controlled and post IPO, there will only be a public float of 14.8%.
What i Like about the Company
- Competent management who have been growing the Company steadily. For the last three years, revenue and profit has grown significantly and this is in the wake of difficult conditions in the oil and gas sector.
- The independent board members are also reputable and competent and it is audited by a big 4.
- Kim Seng Holdings is an experienced oil and gas player (Tan Kim Seng founded and sold KS Energy in 2006) and they have a substantial 25.6% stake. Between 1998 and 2006, Tan Kim Seng grew KS Energy's net income from S$2m to S$31.9m. You can safely say that they do see some value in this investment.
- Interest is aligned and the free float will be tightly controlled as 69% are held by John and Kim Seng Holdings.
- With oil prices falling, new oil exploration activities will probably drop and there will be more focus on mature oil fields to improve the yields.
Some of my concerns
- Recent market sentiments is weak
- Oil & Gas related sectors stocks continued to be challenged, looking at how the share prices of many companies in this sector has performed in the last 12 months. However, having said that, the Company is not in the same type of business as many of them and has delivered in 2014 even though it was a challenging environment. When i look at the list of competitors, i couldn't identify a listed company for peer valuation.
- It is a small cap stock at S$37.8m and with a small public float.
- Whether the newly acquired AWT in 2014 will perform as expected and meet the earn out.
My valuation and ratings
If i assume that EPS continues to grow by a more modest 25% this year and PE remains between 6-8x, the fair value is around 20.5 cents to 27 cents.
With majority of the shares held by by two key players and a small free float of 28m shares, it will not be difficult to control the placement. Given the low share price of 20c and the promise to pay dividends for the next 3 years, i believe there could be some post IPO support but don't expect too much first day fireworks.
As such, I will give it a 2 Chilli ratings purely because it is sold at decent valuation and my gut feel is that you can probably flip it for at least 2 cents. The key challenge is whether you can get enough shares from ATM to make it worthwhile.