by winston » Fri Jun 20, 2008 9:08 pm
Not vested. BTW, would they be hurt by higher raw material prices, low US$ and higher wages ?
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Rotary on players' radar screens
By VEN SREENIVASAN
THE soaring demand for and price of oil has turned out to be the biggest challenge facing many companies in recent memory. But challenges for some can be opportunities for others.
Mainboard-listed Rotary Engineering is a case in point. The company is one of Asia's most established builders of oil storage terminals and depots, with a footprint that stretches from the Middle East, to South Asia, South-east Asia and China.
One only needs to step over to Singapore's petrochemical hub at Jurong Island to view its handiwork. The island houses the lion's share of the more than 1,000 tanks comprising seven million cubic metres of storage capacity that Rotary has built to date across the continent.
One of its biggest contracts, completed late last year, was the $535 million deal to build 73 storage tanks and 12 marine jetties for Heng Leong group, one of the region's largest oil traders. It is currently working on $400 million worth of projects on the island, including Shell's Houdini. And orders keep flowing in. Yesterday, the company announced its latest deal: A $102 million contract from Jurong Island-based Oiltanking Group to build chemical storage facilities and terminals.
The rapidly changing dynamics of the global energy sector continue to fuel Rotary's order books. In recent years, there has been an increasing trend in major energy-producing countries to store and process their own oil and gas, rather than let all their output go directly through the hands of the global energy majors. This, in turn, has fuelled the demand for more storage terminals and tank farms.
Rotary has been capitalising on this trend by aggressively courting more projects in the Middle East, China, India and elsewhere. Early this year, it increased its stake in its joint venture company, Petrol Steel Co Ltd, in Saudi Arabia to 51 per cent and announced a US$62 million deal with Saudi Kayan Petrochemical Company to construct 24 tanks for its Saudi Kayan Petrochemical Complex in Al-Jubail. More deals could be in the pipeline if other clients it is courting, such as Aramco and Sabic in Saudi Arabia and Kuwait's National Petroleum Corp, follow suit.
The company is already prequalified for Aramco's multimillion-dollar Jubail Export Refinery Project and Yanbu Export Refinery Project in Saudi Arabia. Not surprisingly, company officials seem quietly confident that Rotary's over $600 million order book could surpass $1 billion before the end of this year.
The results are already evident. Rotary recently posted record full-year earnings of $52.8 million, up 50 per cent from 2006's $35.2 million. It turned in a net profit of $10.2 million for the first quarter ended March 31. And even as it continues to secure more projects in Asia and the Middle East, it is already venturing into new markets in Africa and Latin America where new oil discoveries are fuelling demand for more terminals.
Recently, Rotary started going downstream into its own inland energy depot and distribution business as demand for these facilities intensifies in countries like India and China in the face of distribution bottlenecks at their coastal terminals. Late last year, it invested some $20 million to set up its 45 per cent-owned venture Jinzhou Everthriving Logistics Co Ltd to distribute liquefied natural gas from Inner Mongolia to key cities in north-east China. Plans are now underway to replicate the model in Vietnam, India, Indonesia and the Middle East, where demand is on the rise.
Yet another new venture it is currently embarking on is waste energy reprocessing. Rotary's 40 per cent-owned waste-to-energy plant on Jurong Island collects waste oils and chemicals, oxidates them, then converts them into steam energy to customers such as Perstop (S) Pte Ltd, which, in this case, produced and supplied the waste oil in the first place. Quite a neat and profitable green venture. If Rotary continues on its current growth trajectory, its share of income from offshore projects could soon exceed domestic Singapore contributions (last year domestic revenue accounted for 80 per cent of its topline).
Perhaps, not surprisingly, the company recently started attracting the attention of bigger international players who are keen to expand their global footprint via acquisitions. Whether its current shareholders, led by founder Chia Kim Piow, would be willing to part with their company remains to be seen. But the fact that Rotary is now on the radar screens of bigger global players testifies to the achievements of this homegrown company.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"