I have analysed the companies mentioned above.
CH Offshore – Pros:
- Good dividend yield
- Lowest P/E amongst the three
- Highest Gross Profit Margin and Net Profit Margin amongst the three
- Highest Current Ratio
CH Offshore – Cons:
- Extremely high CAPEX
- Thus, no free cashflow for a number of years
This one aspect has put me off and I’ve swept CH Offshore off my radar.
CSE Global – Pros:
- All the ratios and trends are fine expect that the current price ($0.955) is above my calculated intrinsic value ($0.69). Will wait till price comes below intrinsic value. See the thorough analysis as shown right below.
Yangzijiang – Financial statements are given in RMB. Need to convert to SGD to do a proper full analysis. However, a simple analysis of the company is given in the comparison table below.
Comparison of the three companies:
CSE Global thorough analysis:
It can be seen from the table that CSE is a fundamentally very strong company, just that the current price is high in my opinion. If you have any questions, please post it in the comments section. In the future, I will post on how I actually analyse companies and determine if it’s a good buy.
On a side note, before setting up this blog, my analysis were all in Word doc and it wasn’t presentable. The ratios and trends cannot be seen at one glance. After trying out Excel spreadsheets as done by other bloggers, I must say it’s much nicer to look at and faster to analyse the companies with the use of formulas. If I haven’t started this blog, I think I will still be using the Word doc way and struggling through lots of files and scrolling up and down and spoiling my already deteriorating eyesight…
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.
I went for an offshore marine sector talk organised by CIMB and it was held at Raffles City Convention Centre. I have been staying away from the offshore marine sector every since I started investing as I didn’t understand the industry at all. However, after attending the talk, I have a better understanding of the industry and the value chain part of it. The companies covered were CSE Global, Yangzijiang, SBI Offshore, Viking Offshore Marine, Otto Marine and Marco Polo Marine. So far, after having heard the company briefs, I like Yangzijiang, SBI Offshore and Otto Marine. I like Yangzijiang for its good cash balances, strong order book and has a record of no cancellation of orders so far – shows how it only builds ships for credible customers. I like SBI Offshore for its high gross profit margin at 34.4% in FY2009 but I’m unsure if it’s sustainable. I like Otto Marine for having a frank and credible management. The person who gave Otto’s brief was its Vice President and he was very candid and frank with the audience. I have yet to research thoroughly in these companies though. I will keep you posted on any further developments.