Rotary Engineering

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Hi all, anyone willing to share knowledge about this company?

Company Background

Rotary Engineering Limited is a Singapore main board listed company, is a market leader in providing engineering design, procurement, construction and maintenance services. It serves the oil & gas, petrochemical, and pharmaceutical industries.
Headquartered in Singapore, Rotary has established a strong presence in the Asia-Pacific region over the last 30 years. Today, the Rotary Group of Companies, with a total workforce of over 2000 employees...
Business Times - 19 Jan 2011

Hock Lock Siew
Rotary chalks up one success after another


FORGING strategies from challenges - that's what engineering, procurement and construction (EPC) specialist Rotary Engineering is cleverly doing. When the Singapore market for oil terminal projects (its forte) dried up as land-challenged Jurong Island quickly filled up following the influx of higher-value-add petrochemical projects, it was forced to turn outwards. Thus, from local projects (like Hin Leong Trading's Universal Terminal) accounting for 80 per cent of its revenues just five years ago, today it's the reverse.

Overseas projects - like its billion-dollar Saudi Aramco Total (Satorp) oil terminal in Jubail, Saudi Arabia and another smaller terminal in Fujairah - now account for 60-70 per cent of Rotary's revenue, Chia Kim Piow, its chairman and MD, tells BT. And the group's longer-term target - say, in five years - is for an 80:20, foreign:local revenue split.

Currently in its sights this year are more Saudi projects, like an estimated US$750 million tankfarm for the US$7 billion Jizan refinery project, as well as break-bulk oil depots near Riyadh, worth about US$200-300 million each. Rotary is also bidding for an oil terminal project in Turkey involving Turkish petrochemicals producer Petkim and Dutch terminal operator Vopak at the port of Aliaga, which will reportedly be modelled along the lines of Jurong Island. And it also wants to venture into Africa, where it is eyeing a tankfarm project in Libya.

Still, despite the Middle East expected to account for 60 per cent of its projects, and Europe (including Turkey) for another 20 per cent, it is not ignoring home market Singapore. It is currently in discussions with a new wave of incoming specialty chemical producers - like the synthetic rubber producers and others at the new high-purity ethylene oxide 'corridor' on Jurong Island, Mr Chia reveals.

Construction of such chemical process plants will now form the third leg of Rotary's portfolio, adding to its other established areas like EPC for independent oil terminals, and EPC for tankfarms which are integrated with refineries/ petrochemical complexes, as well as offsite projects like utilities.

Mr Chia also argues that Europe (which is closing many of its older, inefficient refineries) is also not a mature market, as the continent's strong energy demand in fact translates to a need for new storage and distribution terminals to be built.

Backing up Rotary's ambitious global drive is its own 7,000-strong trained global workforce (including 1,000 from Singapore), half of whom are from India with the remainder mainly from China - countries where it has established training centres. Having such workers on hand is critical, Mr Chia stresses, lamenting, for instance, the loss of thousands of trained workers 'who just disappeared from Singapore' after the Shell petrochemical complex was completed recently. At its peak, some 6,000-8,000 workers were employed at the Shell site.

'We are also quite slow,' Mr Chia says, when asked about Rotary's recently announced plan to take stakes in oil terminals in Indonesia (Kalimantan and Surabaya are potential sites, he says), Malaysia and Vietnam, as well as in the Middle East. What he means by this, he explains, is that while property contractors here have gone on to become big property developers, the EPC players haven't as yet done so. Rotary's route to this is likely to be through the BOT (build-own-transfer) process, as operating a terminal is not its forte, he adds.

Again, this new strategy - to take stakes in its EPC projects - was born out of necessity. Ever since the global credit crunch, banks have been more tightfisted, and Rotary's equity participation of, say, a 15-20 per cent stake in such projects - or roughly equivalent to its typical gross margin of 18-20 per cent for EPC projects - 'will help reassure the bankers', the astute Mr Chia says. It is currently in discussions regarding equity stakes in several potential projects, but is not ready to disclose details just yet, he adds.

Under its plans to go global, Rotary Engineering, with a market cap of over $500 million, will hold an inaugural regional conference here this Friday with a keynote address by Finance Minister Tharman Shanmugaratnam. Some 200 participants including from government organisations and industry, comprising players like Shell, ExxonMobil, Oiltanking, Vopak, National Iran Oil Company, Concord Energy and Malaysian Industrial Development Authority, will be attending.
My Value Investing Blog:
Rotary wants to go asset-based?
SINGAPORE - Singapore's Rotary Engineering , a construction firm that specialises in energy projects, said Chief Financial Officer Koh Thong Hean has tendered his resignation and will leave the firm on May 3.

Koh, CFO since February 2009, is quitting to pursue another career opportunity, the company said.

Group Financial Controller Cheong Yew Meng will oversee the finance functions of the firm for the time being, Rotary said in a filing to the Singapore Exchange.
Wonder if he is leaving due to greener pastures or there could be problems unknown to the public?
Business Times - 06 May 2011

Rotary may invest $50m in oil storage terminals

Its Q1 profit plunges 62% to $5.3m; turnover down 27%


OIL and gas infrastructure services firm Rotary Engineering is looking to invest about $50 million, for stakes of 10 to 15 per cent stake, in the building, owning and operating (BOO) oil storage terminals in the future.

The move towards BOO in Asean and the Middle East is meant to ensure recurring business where 'we have a better chance of continuity in their expansion projects', said chairman Chia Kim Piow.

The return on investment, estimated Mr Chia, would be between 10 and 12.5 per cent a year in the first decade of the terminals' operation.

'It would not be as lucrative as construction,' said Mr Chia.

Rotary's Q1 report card was less than stellar due to fewer local projects and also the transition in its Saudi Arabian project from engineering and procurement to construction.

Turnover for the quarter tanked 27 per cent to $130.5 million from $179.7 million last year.

Net profit plummeted 62 per cent to $5.3 million from $13.8 million in the year-ago period.

Earnings per share were at 0.9 cent, down from 2.4 cents.

Its billion-dollar contract to build storage tanks in Saudi Aramco Total Refining and Petrochemical Company (Satorp) oil terminal is on track to finish by the end of 2012.

CIMB analyst Yeo Zhi Bin said that Rotary's H2 performance is likely to be much better as recognition of revenue from Satorp would come in during the middle or end of the construction phase.

Gross profit margins are expected to be maintained at 18 per cent for the year, although a tentative guidance pegs it in the range of 15 to 20 per cent.

Rotary's order books are at $823.9 million as at March 31, down from $1.1 billion at this time last year.

Mr Chia assured investors and analysts yesterday that the company was active in direct negotiations and tendering for projects in Asean, Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates) and Turkey.

Though Mr Chia didn't name specific projects, Rotary is believed to be gunning for a project in North Turkey's port of Aliaga involving petrochemical producer Petkim and Vopak, the world's largest storage provider.

While Singapore's Jurong Island has a number of downstream projects available, Mr Chia said Rotary is not aggressively bidding for them.

'The contracts are very competitive, and we're not looking to bid too low,' said Mr Chia.

'We also have a lot of projects in the pipeline. We don't want to unnecessarily burden ourselves, so to speak, in all these skinny projects, which are mostly construction. Our core business is still EPC in tank farms or off-site utilities.'

Mr Yeo maintained his 'outperform' call on the stock, with a target price of $1.26.

Rotary ended the trading day down 1.5 cents at 90.5 cents.
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Business Times - 05 Aug 2011

Rotary Q2 earnings down 26%


ROTARY Engineering reported a second-quarter net profit of $10.2 million, down 26 per cent from $13.7 million one year ago. This brings its net profit for the six months ended June 30 to $15.5 million, a 44 per cent drop from the previous corresponding first half's $27.5 million.

A factor in the profit drop was the rise in profit attributable to minorities.

The group declared an interim dividend of one cent per share.

Q2 revenue was $153.3 million, down 27 per cent from $209.4 a year earlier. The impact on net profit was mitigated by a three percentage point rise in gross profit margin to 21 per cent. Earnings per share (EPS) for the second quarter stood at 1.8 cents, down 25 per cent from 2.4 cents last year.

The company attributed its revenue fall to phase change in its Satorp (Saudi Aramco Total Refining and Petrochemical Company) project. But gross profit margin improved largely because of project closures, it said.

Rotary suffered some foreign exchange losses in administrative costs for Q2, due to a weaker US dollar.

Rotary chairman and managing director Chia Kim Piow said the group's performance was creditable given the fragile global economy and the recent string of developments in Europe and the US.

'It's been challenging but we are glad to report fairly good numbers this quarter as compared to the first quarter of 2011. We continue to be busy with business development activities and stay vigilant for promising prospective deals,' said Mr Chia.

Rotary said the group is underpinned by a strong balance sheet with total assets of $722.5 million, net tangible assets of $292.6 million and net working capital of $210.7 million. It also cited strong cash & cash equivalents of $98 million as at June 30. But this was down from $151 million a year earlier as net cash flows generated from operating activities was a negative $5 million against a positive $35.6 million a year earlier.

Saudi Arabia continues to be Rotary's biggest market, contributing 66 per cent of its group revenue. Rotary's largest contract is with Satorp, which is valued at US$745 million. Rotary's scope of work includes engineering, procuring and constructing activities involving 62 atmospheric store tanks and eight bullet tanks.

Singapore was second, contributing 26 per cent of Rotary's revenue. While the oil and gas sector in Singapore had faced some delays arising from the financial situation in the West, the group had sealed 13 deals totalling $40 million in the past several months. 'The group's order book at half year to 30 June 2011 stood at $756.9 million with projects targeted to be completed and delivered progressively, up to end of 2012,' said Rotary. 'Of this, almost 90 per cent of the contracts are overseas.'

Rotary shares closed unchanged at 81 cents each yesterday.

My Value Investing Blog:
Rotary is currently trading at 61 cents, as compared to my previous article posted when it was trading at 81 cents.

The attached article from The Edge probably explains why the business has taken a hit - slower recognition of revenue, a dearth of projects, lower margin and keener competition.

Note too that PEC released its results this morning and they did not look very promising.

(Not Vested)

Attached Files
.pdf   The Edge November 14, 2011 - Rotary Eyes Investments in Malaysia While Analysts Hunt for Floor Valuation.pdf (Size: 369.57 KB / Downloads: 31)
My Value Investing Blog:
Business Times - 09 Dec 2011

Rotary in Malaysian oil terminal project

Feasibility studies and master-planning work have started on the joint venture


SINGAPORE'S Rotary Engineering and Malaysia's Benalec Holdings are planning an independent oil terminal development, offering an initial one million cubic metres of storage in Tanjung Piai in south-western Johor.

If their joint venture is finalised, it will mark the first oil terminal in which the Singapore-listed engineering, procurement and construction group is taking a stake in.

The two companies announced yesterday that they have signed a memorandum of understanding for the project, with Rotary saying that feasibility studies and master-planning work had started.

Consequent to that, they 'will form a joint venture company by participating in taking equity ownership and development of the first one million cu m oil storage terminal as well as other terminal projects'.

No investment figure was given for the deepwater terminal, whose capacity is to be expanded to three million cu m in subsequent phases at the 250-acre site.

Reclamation is expected to start in six months' time and be completed by the first quarter of 2013 after which construction proper can begin. The terminal will store, blend and distribute crude oil and products, and will have jetty facilities to handle very large crude carriers.

As a rough gauge, Hin Leong Trading's 2.28 million cu m Universal Terminal on Jurong Island cost S$750 million to build in 2006, while the 840,000 cu m Horizon Terminal cost US$200 million. But this excludes reclamation costs for the latest Johor development.

There is also no indication at this time of what the equity split will be, although Rotary chairman and MD Chia Kim Piow told BT earlier this year that with banks more tight-fisted following the global credit crunch, they would be more reassured if Rotary takes about a 15-20 per cent stake in such projects - or roughly equivalent to its typical gross margin of 18-20 per cent for EPC projects.

This is a slight revision down from August last year, when Rotary first disclosed plans to take stakes in oil terminals in South-east Asia and the Middle East, saying then that it had the capacity to take up to a 30-40 per cent stake.

Vincent Leaw, Benalec managing director, said: 'We are delighted to have Rotary Engineering on board with us in our maiden foray into the high-growth oil and gas and petrochemical industry.'

Rotary's Mr Chia said: 'With Tanjung Piai's close proximity to Jurong Island, we see much synergy between Singapore and Johor in further developing this area into an even larger international petroleum hub.'

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Business Times - 24 Feb 2012

Rotary Engg's Q4 earnings slide 69% to $8.3m

Revenue down 19%; full-year profit halved to $31m


ROTARY Engineering's fourth-quarter net profit fell 69 per cent to $8.3 million from a year ago, on the back of a 19 per cent dip in revenue to $129.7 million.

The revenue fall was 'mainly due to fewer projects executed as a result of a delay in commencement of certain projects', Rotary said.

'The Satorp project also contributed lower revenues as it underwent a phase change from the engineering and procurement to the construction phase,' it said of its mega US$745 million tankage project in Jubail for the Saudi Aramco/Total export refinery which it expects to complete by this year-end.

'Gross profit margin dipped due to absence of major project closures this quarter,' the oil & gas EPC and maintenance services contractor added.

Rotary's net profit for FY2011 fell by half to $31 million, as revenue dipped 25 per cent to $530.9 million.

This also shaved earnings per share for the year down to 5.5 cents.

Rotary is proposing a final dividend of 2 cents per share, which with an earlier interim dividend of 1 cent, brings the total payout for the year to 3 cents, compared to 4.8 cents in 2010.

Chairman and managing director Chia Kim Piow said it was 'a creditable performance in a year that has seen some testing times and challenging moments' and that 'financial and economic uncertainties in the European Union and an anaemic US economic recovery have led to some project delays'.

The Middle East now accounts for 60 per cent of Rotary's revenue, and Rotary is set to kickstart work in the coming two months on an earlier delayed US$250 million oil terminal in Fujairah for oil trader Concord Energy, plus a US$34 million storage project for a power plant for the Saudi Electricity Company in Shoaiba in June.

'More importantly, in the last several months, we have been able to sew up some deals, and I hope that we'll be able to convert more tenders into contracts as the year progresses,' Mr Chia added.

He recently told BT that it is gunning for another mega Saudi refinery tankage project in Jizan for which Rotary has been pre-qualified.

Its order book to-date stands at $690 million, with projects - about 80 per cent of which are overseas - targeted to be completed and delivered progressively up to 2013.

My Value Investing Blog:
Wait to buy at 30 cents or below Smile

With the outlook, oil companies will be pushing back capital investment, and Rotary Engineering will take a direct hit Smile

FY12 revenues will be around $20mil or eps 3.5 cents.
Even with P/E of 10, valuation is only at most 35 cents.

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