Towards Financial Freedom
SBI Offshore - Enhancing the public float
SBI's executive chairman and CEO Jonathan Hui sold 2m shares to the open market yesterday, representing 1.6% of the issued share capital. We understand that the sale is not a signal of deteriorating fundamentals, but rather an attempt to enhance market liquidity. We are positive on the move as poor free float has been a constant problem preventing investors from buying into the stock, despite the favourable prospects. In terms of fundamentals, the strong order win momentum continues with US$1.5m to US$2m worth of new orders following in every month. Reaffirm BUY with an unchanged TP of S$0.34 based on 9.9x industry average FY12 P/E.
Sale to enhance free float. One of the key risks of this stock was that the free float had been low with both the founders David Tan and chairman Jonathan Hui collectively owning more than 74% of the company. As such, chairman Jonathan sold 2m shares or 4.5% of his original holdings to the public at the price of S$0.238 in an attempt to boost the liquidity. Following the sale, he still retains 34.6% interests in the company. Market reacted positively towards the sale with an 8.3% boost in share price on the back of a strong surge in volume. While a mere 1.6% increase in public float may not be able to solve the liquidity problem, there is a likelihood that a similar sale may occur in the future at the price that better reflects SBI's favourable prospects.
Strong order win momentum continues. Since the group last announced publicly its orderbook of US$41m (up from US$7m a year ago) at the end of February 2012, it had experienced robust new inquires. We believe that its OEM product lines, ranging from lifeboats to offshore cranes, have bagged additional US$1.5m to US$2m new orders every month. On top of that, the group's existing customer Seadrill had ordered a new tender rig to be built by COSCO Nantong shipyard on the back of a five-year secured contract from Chevron Thailand. Our channel checks show that SBI is currently tendering for the rig's drilling equipment turnkey project.
Source: OSK
Sale to enhance free float. One of the key risks of this stock was that the free float had been low with both the founders David Tan and chairman Jonathan Hui collectively owning more than 74% of the company. As such, chairman Jonathan sold 2m shares or 4.5% of his original holdings to the public at the price of S$0.238 in an attempt to boost the liquidity. Following the sale, he still retains 34.6% interests in the company. Market reacted positively towards the sale with an 8.3% boost in share price on the back of a strong surge in volume. While a mere 1.6% increase in public float may not be able to solve the liquidity problem, there is a likelihood that a similar sale may occur in the future at the price that better reflects SBI's favourable prospects.
Strong order win momentum continues. Since the group last announced publicly its orderbook of US$41m (up from US$7m a year ago) at the end of February 2012, it had experienced robust new inquires. We believe that its OEM product lines, ranging from lifeboats to offshore cranes, have bagged additional US$1.5m to US$2m new orders every month. On top of that, the group's existing customer Seadrill had ordered a new tender rig to be built by COSCO Nantong shipyard on the back of a five-year secured contract from Chevron Thailand. Our channel checks show that SBI is currently tendering for the rig's drilling equipment turnkey project.
Source: OSK
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