I did a very quick broad analysis of the offshore companies covered in the talk. After the analysis, I have narrowed down to just two companies: CSE Global and Yangzijiang. I will discuss why the other companies didn’t make the cut.
- Good financial numbers
- But, just IPO recently so have to wait and see how they do
- In a competitive industry. There are so many companies like SBI offering offshore equipment supplies.
- Revenue decreasing over the years
- Inconsistent cashflow from operations over the years
- Net profit margin and Return on Equity (ROE) a measly 2%
- Return of Assets (ROA) is worst off at 1.6%
- Low ROA
- ROE has been decreasing over the years
- Increasingly negative cashflow from operations for the past 2 years
- Net earnings is increasing but operating cashflow decreasing due to the reason that they have $150 million in cash locked in with customers who have yet to pay up. In uncertain periods like now, this is a no-no.
Marco Polo Marine
- Current ratio less than 1
- ROE decreasing over the years
- Net profit margin decreasing over the years
- Revenue not consistent over the years
- Cashflow from operations in FY2009 was $38.4 million but in FY2008 was only $8.6 million. Cashflow from operations jumped so much over one year. Skeptical about this.
So, the better companies are CSE Global and Yangzijiang. I will do a thorough analysis on them soon. I also came across CH Offshore after doing a stock screener in the offshore industry. I’ve heard about CH Offshore previously but I’m not sure why I didn’t look into it before.