Rotary Engineering

[winston]

Rotary wins S$27.7 mln worth of deals
By ANGELA TAN

Rotary Engineering Limited said on Tuesday that it has secured four contracts amounting to S$27.7 million.

They include an Engineering, Procurement & Construction contract awarded by Oiltanking Odfjell Terminal Singapore Private Limited (OOTS) and three revamp and maintenance contracts of varying values secured through its wholly-owned subsidiary Rotary IMC Pte Ltd.

[millionairemind]

Singapore
November 6, 2008, 5.49 pm (Singapore time)

Rotary's Q3 net profit falls 22%
By ANGELA TAN

Rotary Engineering Ltd on Thursday reported net profit for the third quarter ended September 30, 2008 fell 22 per cent to S$9.67 million.

Revenue was at S$118.35 million, down 15 per cent from a year ago.

This was because unlike this year, the previous year saw the completion of several projects at Jurong Island which contributed significantly to the performance.

The group's order book stands at S$550 million.

[ichew]

copy and paste from another forum ws

tot it was a good write up abt trading (ie buy/sell) project based listed companies or any other cyclical biz for the matter

d.o.g. wrote 27-03-2009 06:02 PM

This company's business is orderbook-driven. It should be recognized that the next 1-2 years are going to be difficult; earnings are likely to drop significantly, and the company may even incur a loss. While the balance sheet looks strong enough that the company is unlikely to go under, shareholders need to be prepared for earnings and dividends to decline significantly.

FWIW, in the past 10 years, the worst year was 2002, when the company earned just $2.2m on $108m of revenue. It had $94m of shareholder equity, so bad-times ROE was about 2.3%. As at 31 Dec 08, shareholder equity was $204m. If we use 2002 as a gauge, earnings could decline to as little as $5m in this downturn. This probably won't happen this year given the current orderbook, but next year and the year after are a different story.

Take a look at the orderbook as reported in the annual reports, and draw your own conclusions about what the future looks like.

FY04 $109m
FY05 $142m
FY06 $557m
FY07 $640m
FY08 $446m

Notice the huge jump from FY05 to FY06. Rotary's business cycle is clearly of the "boom-bust" type. A long-term shareholder would not benefit as much as one who bought in when the orderbook was low and exited when the orderbook was high. While few people can predict the lowest or highest points, it is a good idea to start paying attention when the orderbook reaches an all-time low, or an all-time high.

As usual, YMMV.

[winston]

ROTARY ENGINEERING - Rotary Engineering has secured a $745 million engineering, procurement and construction contract to build a refinery tank farm in Saudi Arabia.

[winston]

From CIMB:-

Formal award of SATORP project worth US$745m
Rotary Engineering and its 51%-owned subsidiary Petro Steel have secured a US$745m (S$1.1bn) contract from Saudi Aramco Total Refining and Petrochemical Company (SATORP), a JV between Saudi Aramco and Total, for its Jubail refinery.

The contract includes the full range of EPC activities involving 62 Atmospheric Storage Tanks and eight Bullet Tanks. About US$384m of the scope of work will be managed entirely by Rotary in Singapore and US$361m handled by Petro Steel in Saudi Arabia. Rotary is due to start work in Aug 09 and the project is scheduled to be completed by end-2012.

Comments
Contract value higher than expected. The contract is 6% above our original estimate of US$700m. Rotary’s work scope is also 20% above our expected US$320m. While engineering and design work will start in Aug 09, we expect material earnings contribution only in FY2010. We raise our earnings estimates by 3-7% for FY10-11.

Positive order outlook in South-East Asia. With SATORP’s win, we believe Rotary could afford to bid less aggressively for the other Middle Eastern mega-sized project, Yanbu refinery, that was recently reactivated. However, we continue to see orderbook opportunities from small-to mid-sized orders (S$50m-200m) in the region as Rotary is in an advanced stage of negotiations for terminal and storage projects in
Indonesia, Thailand and Malaysia. Order book is now about S$1.5bn.

Valuation and recommendation
Maintain Outperform; higher target price of S$0.90 (from S$0.88), following our earnings upgrade, still based on 11x CY10 P/E. More order wins and the successful execution of projects could provide catalysts for the stock. Rotary is trading at 9x CY10 P/E, or a steep discount to its regional peers, Dialog in Malaysia and Sino-Thai Engineering (average 15x).

[millionairemind]

Published July 24, 2009

Brokers' Take

Rotary Engineering
July 23 close: $0.86
CIMB-GK RESEARCH, July 23

ROTARY has clinched a $48 million engineering, procurement and construction contract from PTT Tank Terminal Company in Thailand, for the construction of an ammonia storage tank and facilities at the Map Ta Phut petrochemical hub in Thailand's Rayong Province.

The scope of work includes the supply of equipment and materials, engineering, construction, commissioning and start-up of the PTT Tank Project. Work has begun and is expected to be completed in 20 months.

Rotary has also clinched two contracts worth $36 million from Neste Oil Singapore to undertake work at Neste's $1.2 billion NExBTL renewable diesel plant in Tuas.

The contracts are for electrical and instrumentation (E&I) work as well as mechanical, piping, painting and steel structures work. The mechanical and piping contract is expected to be completed by March 2010 and the E&I installations, by mid-2010.

These contracts fall within our contract-win assumptions for 2009-10, in the range of $50 million-$200 million expected for the South-east Asian region. With the worst of the recession behind us, it would be reasonable to expect more contracts that were earlier postponed.

We believe the PTT Tank Terminal Co and Neste projects mark the start of more regional contracts. The recent award of a US$10 billion contract by the Merapoh Resources refinery project in Kedah, Malaysia to South Korea's SK Group is another positive sign.

Malaysia also has another US$4.6 billion oil-refinery project in the state of Perak, in conjunction with a Qatar company. This project will comprise an oil refinery, a petrochemical plant and storage facilities, and is expected to come onstream in two years.

With these new orders, Rotary's order book has been lifted to $1.52 billion. We believe there is scope for further growth in 2009 as there are still projects in the region, in particular, Malaysia and Indonesia.

Maintain 'outperform' and target price of $0.90, still based on 11x 2010 P/E. More order wins and the successful execution of projects could be catalysts for its share price, we believe.

Given a growing proportion of higher-margin overseas contracts in its order book, we will be reviewing our 2010-11 forecasts. Rotary is trading at 9.5x 2010 P/E, at a steep discount to its regional peers, Dialog in Malaysia and Sino-Thai Engineering (average 15.5x).
OUTPERFORM

[winston]

Hmmm... would the increase in commodity prices hit their bottom line ?

Their margins are also quite thin. Do they have adequate room for any execution risk ?

[Musicwhiz]

Hmmm... would the increase in commodity prices hit their bottom line ?

Their margins are also quite thin. Do they have adequate room for any execution risk ?

Hi Winston,

Why would increase in commodity prices impact them ? I believe they are doing EPC work building oil storage tanks. So perhaps an increase in oil price may even benefit them. Just my thoughts.

Margins for EPC are traditionally not high. For Rotary I believe it hovers around 7-8%.

[winston]

I was thinking of Steel Prices...

[Musicwhiz]

I was thinking of Steel Prices...

I see. Yes, that may have an adverse impact on them. Perhaps you can check their Annual Report? If not, email their IR contact to verify.