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5 Things To Know About Kim Heng Limited (SGX: 5G2), Transiting From Marine & Offshore To Renewables

From oil to wind

Singapore has one of the world’s busiest ports. Unsurprisingly, many marine and shipping companies, big and small, have made Singapore their home harbour. Aside from the large offshore and marine conglomerates such Sembcorp Marine and Keppel O&M, there are many smaller marine companies that call Singapore their home harbour.

Today, we bring to your attention Kim Heng Limited (SGX: 5G2), an integrated marine and offshore company in Singapore. Listed on the SGX Catalist since 2014, Kim Heng Limited’s key revenue segments are renewable energy support services, vessel chartering, heavy equipment sales and rental and marine offshore support services in FY2020. The company also has 2 shipyards, fabrication facilities, 15 cranes as well as a vessel fleet of 11 tugs, 25 barges, 3 (Offshore Support Vessels (OSVS) and 7 Anchor Handling Tug Supply (AHTS).

As the trend towards sustainability and renewable energy sources grows, companies in marine and offshore industry are increasingly moving away or diversifying from their business operations in oil and gas. With its rebranding, Kim Heng Limited is also moving to the next phase of their carbon transition journey. In FY2020, Kim Heng started 4 major projects to transition towards renewal energy and supplementary business: servicing offshore wind projects, vessel chartering, vessel disinfection and marine salvage and emergency response services.

For those interested to find out more about how a marine and offshore company transitions to renewables or interested to invest in marine companies, here are 5 things to know about Kim Heng’s business.

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For someone who is new to your company, can you explain what KH does?

The company has recently rebranded and refreshed into five business segment and kick-started growth into new areas of business to embrace the green transition which are as follow:

  • KH Renewables which will focus on business in the clean energy ecosystem in offshore Windfarm, solar energy, hydrogen and LNG projects installation and support services.
  • KH Marine construction which will focus on undertaking project management, marine and port construction projects, heavy equipment rental, chartering of tugs and barges for marine transportation and towing services, oil spill operation, salvage and wreck removal.
  • KH Oilfield which will focus on Oil & Gas engineering and support services of rig and oil platforms reactivation, repair and maintenance, procurement and logistic support.
  • Bridgewater Offshore owns and operates offshore support vessel engaging in rig towing and rig moves for drilling contractors and oil majors, ocean towage for merchant ship owners and windfarm installation support to offshore contractors.
  • KH Shipbuilding and Supply base owns and operates 2 licensed shipyards with water fronts in afloat repairs of vessel, steel fabrication, electrical and mechanical repairs of vessel and rig, general shipping agency and husbandry works for vessel calling into port of Singapore for crew change, bunker fuel and general supplies.

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Describe the Group’s financial performance in recent years.

Revenue has improved from $38.0 million in FY2018 to $58.1 million in FY2019. However, due to the COVID-19 pandemic, our revenue decreased to $37.6 million mainly due to project delays.

In terms of EBITDA, the Group swung from a negative EBITDA of $4.3 million in FY2018 to positive EBITDA of S$630,000 and $4.3 million in FY2020 and FY2019 respectively, excluding one-off non-cash impairments recognised in FY2020 and FY2019.

Net cash generated from operating activities was $3.6 million and $4.9 million for FY2020 and FY2019 respectively. Cash and cash equivalents stood at a healthy $6.2 million for FY2020 and $3.1 million for FY2019.

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What are some of the key initiatives by the Group to ride on the shift towards the renewable energy sector?

We have developed an integrated roadmap for supporting the offshore windfarm which includes survey and dredging, foundation installation, turbine installation, transportation, cable laying services, and operation and maintenance services.

We launched four key initiatives to accelerate our transition away from oil and gas into renewable energy:

  • Thaitan International – 50% Joint Venture between Kim Heng and Thaitan. Established in October 2020, the joint venture aims to service offshore wind projects and has serviced several offshore windfarms in Yunlin, Taiwan with managementseeking to expand its role and search for new projects.
  • Bridgewater Offshore – Expanding vessel chartering capabilities with Phillip Capital. It has acquired six anchor handling tug supply and anchor handling tug vessels to enable us to offer vessel chartering, support our offshore renewables business and marine construction at competitive rates.
  • Vessel disinfection for COVID-19. A new service aimed at cleaning, disinfecting, and sanitizing marine vessels, in-line with the enhanced precautionary measures recommended by the Maritime & Port Authority of Singapore and comply with stringent standards set by the National Environment Agency.
  • Zale Offshore – 24/7 marine salvage and emergency response. Kim Heng’s new incorporated subsidiary with marine units that can be deployed to assist in mitigating oil spills and salvage accidents in the Asia Pacific region.

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Having a “moat” or a competitive advantage is something many investors look for in companies they invest in. Can you share how KH has a strong business advantage?

We have avoided the worst of the crisis, having learned through many previous crises of booms and busts to guard against over leveraging, and to remain prudent with sufficient cash on hand to sustain through the downturn.

Despite continued industry uncertainty, we have established a strong positional advantage in offshore renewables.  We also continue to develop capabilities for long-term growth by prudently investing when the industry is weak and asset prices are distressed.

We are in constant touch with the market challenges looking for new growth, setting new goals and building resilience across our Group by searching for niche business.

With our excellent technical know-how and strong network of global contacts, it has given us the ability to change, move and adapt very quickly to make the transition and capitalising on a timely market opportunity.

Why do you think investors should take a closer look at Kim Heng?

Management believes that the Group has displayed resilience and shown its ability to bounce back from the challenging marine and offshore industry.

We took on several initiatives to improve the company’s cost structure. This allowed us to re-stabilise and seize new opportunities to re-start growth as we entered new markets and sped up the development of new capabilities by leveraging on our knowledge transfer from our many years of experience in the marine, oil and gas industries.

Kim Heng has also since diversified into the renewable energy segment which can provide additional revenue streams and reduce our dependence on the existing business.

Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 10 Aug 2021 and have been republished with permission. You can read more on the SGX website.

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