Teho, a supplier of rigging and mooring equipment as well as related services mainly to the marine and offshore oil and gas (“O&G”) industries, today launched its initial public offering (“IPO” or “Invitation”) in connection with its proposed listing on the Catalist of the SGX-ST (“Catalist”).
Collins Stewart Pte. Limited is the sponsor and placement agent for Teho’s listing on the Catalist. Trading of the Company’s shares on the Catalist is expected to commence at 9:00 am on June 4, 2009.
The IPO of 16.8 million Placement Shares, comprising 11.8 million New Shares and 5.0 million Vendor Shares, represents 15.0% of Teho’s enlarged share capital of 111,800,000 shares. At S$0.24 per share, the Placement is priced at a historical price earnings ratio of 3.0 times, based on the Group’s net earnings per share of 7.9 cents for FY2008 and pre-Placement share capital of 100 million shares.
Teho believes that it is one of the leading suppliers of rigging and mooring equipment in Singapore having a long history of more than two decades and an established reputation with a diversified customer base mainly in the marine and offshore O&G industries. Teho’s major customers include PSA Group and Tanker Pacific Management (Singapore) Pte Ltd.
The Group carries and supplies a comprehensive range of reliable and quality rigging and mooring equipment under established brands (such as “Kiswire”, “Dong Yang”, “Manho” and “Wirelock”) and provides related services comprising mainly load testing, installation and certification of rigging equipment for further use.
Rigging equipment comprises steel wire rope, synthetic fibre sling and chain which are assembled with other connectors and fittings (such as clamps, shackles, masterlink, hammerloks, hooks and turnbuckles) to form different variations of slings, depending on applications, generally for lifting purposes. Mooring equipment consists mainly of steel wire and synthetic fibre ropes and is used for docking the vessel to the dock. Teho is also exploring offering or to offer in greater quantity other types of rigging and mooring equipment such as winches and deck equipment in the foreseeable future.
Headquartered in Singapore, the Group operates two facilities (including warehouses) in Tuas which occupy an aggregate land area of approximately 18,000 sqm with an aggregate built-in area of approximately 10,200 sqm.
The Group’s sales and marketing network covers mainly South East Asia (including Singapore), East Asia, Australia, Europe and North America. With a subsidiary in North Carolina, USA to facilitate sales in the North American region, the Group has also established logistics points in major shipping and offshore O&G hubs such as Rotterdam, Houston and Dubai through third party service providers in Antwerp (Belgium), Houston (USA) and Sharjah (UAE).
Said Lim See Hoe, Executive Chairman and Chief Executive Officer of the Group, “We are proud of the competitive strengths which we have built over the last two decades. Our established reputation and track record with our customers and suppliers; our comprehensive range of products under established brands such as Kiswire, Dong Yang, Manho and Wirelock, and our network of subsidiaries and logistics points in major shipping and offshore O&G hubs -- all serve to support Teho’s leadership position in our industry.”
He added, “Over and above that, Teho possesses a strongly committed management team with extensive experience, substantial technical expertise and valuable business relationships with customers in the industries our Group serves.”
While Teho does not currently have a formal dividend policy, the Group intends to recommend and distribute at least 20% of its net profit attributable for FY2009 and FY2010 to Shareholders.
Although the current outlook for the marine and offshore O&G industries is uncertain due to the global economic downturn, the Directors believe that the underlying demand trends for these industries over the longer term remain positive as trade and demand for energy recover. One of the factors supporting the Group’s view is the prospects for the growth of transhipment activities and shipping traffic in Singapore. The Group believes that vessels (such as container freighters, coasters, bulk carriers, tankers, passenger vessels, regional ferries, barges and tugs) are likely to continue to replenish their rigging and mooring equipment and/or other supplies at the port of call.
Elaborated Mr. Lim, “Our Directors believe that although the demand for our rigging and mooring equipment may not be able to sustain the same growth patterns as reflected in past, we remain optimistic that it will likely continue to be firm once the marine and offshore O&G industries recover from the current economic downturn, particularly as seaborne transport accounts for the bulk of world trade and Singapore is the world’s busiest container port.”
Continued Mr. Lim, “Notwithstanding the global economic condition, our Group’s revenue in HY2009 rose by 16.4% due mainly to demand arising from replacement of rigging and mooring equipment by customers.”
In addition, the prospects for the growth of shipbuilding and ship repair activities in Singapore and other regions also support longer term prospects of the industries Teho serves. For one, Singapore’s strategic location makes it a natural hub for the marine industry in the Asian region, where companies are engaged in providing offshore O&G support services and marine-related activities. Singapore also provides good port facilities for arriving vessels which avail themselves to these ship repair facilities.
Added Mr. Lim, “Apart from Singapore’s strength as a marine hub, we believe that many of the major shipbuilders in Singapore have expanded their activities into other regions such as the Middle East and the PRC. We believe that opportunities may arise for us to capitalise on the expansion and to derive new sources of revenue from our existing and new customers.” Although the current downturn may have a temporary adverse impact, the demand for energy has increased steadily over the past four decades driven mostly by continued industrialisation and economic growth of developing economies such as the PRC and India. However, oil has been the leading commodity for the world’s energy needs for the last four decades and is expected to continue in the long term, notwithstanding the short term volatility in prices of crude oil, particularly in 2008.
“We believe that the capital expenditure for offshore O&G exploration and production activities, demand for specialised vessels, offshore structures and oil rigs will likely increase. And in such an event, we believe that the demand for our rigging and mooring equipment and related services will increase as well,” said Mr. Lim.
The Group’s proven financial performance can be seen from its growth momentum for the last three financial years. The Group’s revenue for the financial year ended June 30, 2008 (“FY2008”) rose to S$35.3 million, from S$25.1 million in FY2006, representing a compounded annual growth rate (“CAGR”) of 19%, while profit attributable to equity holders of parent, net of tax, soared 181% to S$7.9 million, from S$1.0 million, during the period. This is after adjustments for the one-off realisation of the fair value reserve of approximately S$2.4 million relating to the available-for-sale investments and fair value loss of approximately S$0.3 million in FY2008, as well as the professional fees and expenses in relation to the Placement incurred in FY2008 of approximately S$0.3 million.
For the six-month financial period ended December 31, 2008 (“HY2009”), revenue and profit attributable to equity holders of parent, net of tax, was S$18.7 million and S$5.7 million respectively, up from S$16.1 million and S$4.2 million in HY2008.
Said Mr. Lim, “Our order book momentum remains healthy. From January 1, 2009 until April 30, 2009, our order book based on confirmed sales orders was approximately S$10.6 million, of which approximately S$2.5 million had been fulfilled.”
Use of Proceeds
The IPO is expected to raise net proceeds (after deducting the estimated expenses incurred in connection with the IPO) of approximately S$1.7 million, which will be used to fund possible acquisitions and/or strategic alliances when opportunities arise, and for the Group’s general working capital purposes.
“Teho is cautiously optimistic about the prospects of our business and the marine and offshore O&G industries, barring unforeseen circumstances. In view of this, our business strategies and future plans will be focused on expanding our geographical coverage, product range and offerings, and storage and fabrication capacity in order to better serve our customers,” said Mr. Lim.
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