• Kim Heng (SGX:5G2)'s FY21 revenue improved 68% y-o-y to $63.2m as all segments except equipment rental showed improvement. Chartering and towage is the largest contributor. The segment revenue jumped +172% y-o-y to S$29.4m and represented 47% of total revenue, up from 29% in FY20. The increase is underpinned by higher charter rates and utilization rate.
• Although net loss widened to S$5.9m (+12% y-o-y), EBITDA has jumped 7.7x y-o-y to S$5.4m.

There Is More Headroom for Charter Income to Grow

• Geopolitical conflict between Russia and Ukraine further tightens oil supply in the market and supports higher oil prices. These are positive catalysts for more offshore production activities which translates to higher day rates for vessel charter. Margin is expected to expand further as well following higher utilization of its fleet.
• As part of its efforts to grow in the renewable space, Kim Heng has secured installation works (wind turbine parts) for an onshore windfarm project in South Vietnam late 2021. Consideration comes in the form of monthly project milestone of US$0.24m (~S$0.33m) for a period of 30 months starting Nov 21.
• Separately, Kim Heng has also completed its cable laying works for Yunlin offshore windfarm project in Taiwan. Vessels serving the project are currently off-charter and stationed in Taiwan. There is no work at the moment given the off peak season. The next season will start in 2Q CY22, pending Kim Heng securing new projects.

Kim Heng - Valuation

• Kim Heng is in a net current liability position of S$8.5m. Net gearing ratio is at 70%. Being in a capital intensive industry, Kim Heng uses EV/EBITDA of 18.6x.

Source: SAC Capital Research - 30 Mar 2022