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We have come to Part 3 of my MTQ analysis, and I hope the previous 2 sections have been useful thus far in reviewing the company.
I was hoping to get some constructive criticisms but thus far there have been no comments given on either Part 1 or Part 2; so now I am pressing on with Part 3 which is much more qualitative in nature.
Part 3 will discuss the prospects of each division (i.e. Oilfield Engineering and Engine Systems), as well as comment on the prospects and likely business climate for each division and for the Company as a whole in the next 6 months (till MTQ release their 1H FY 2011 results). I will also touch briefly on MTQ’s capital structure in the near-term and their likely cash flow and dividend stream.
Oilfield Engineering Division
Oilfield Engineering has always been the mainstay of MTQ’s business, as my analysis of purchase had described, they are one of the few played in the region which can provide timely and quality service to customers, thereby resulting in repeat business with a loyal customer base. Looking at the results for FY 2010 though, one can see the damage done by the global financial crisis on this division, as oil majors had drastically decreased their spending on E&P amid tight financing conditions; and also because most of these majors have become cautious on spending too much in case they were unable to sufficiently recoup their investments. Note too that oil prices had collapsed from a high of about US$148 per barrel to the current US$70 per barrel, and there could be further weakness moving forward due to the current Euro crisis. MTQ are, to a certain extent, exposed to this risk as they are servicing clients in the South-East Asian region where the players are more sensitive to oil prices. However, there may be light at the end of the tunnel in terms of managing the volatility of the revenue stream for this division (see next para).
In Jan 2009, MTQ announced that they were venturing into Bahrain, a country in the Middle East, and were planning to build a new facility there up to 3 times the size of their Singapore Pandan Loop operations. Since then, they had awarded a contract to build Phase I of the development to a contractor, and work has since begun and is targeted to be completed by early 2011. Assuming the facility starts to attract customers and generates revenues, the revenue stream would be far more stable as the oil majors in the Middle East region are not so affected by fluctuating oil prices; rather their cost of production is probably just US$1 to US$2 per barrel! MTQ would also be able to capture a new base of customers there (barring strong competition from incumbent players, of course) and perhaps also extend their existing business relationships with their current pool of customers to service their Middle Eastern operations. Of course, at this juncture there is still no clarity on business prospects and potential revenues as the facility is under construction; but if assuming all goes well, this new facility could significantly boost MTQ’s business in the long-term. Read more...[caption id="attachment_1562" align="alignright" width="150" caption="Photo by nasrulekram"][/caption]
We have come to Part 3 of my MTQ analysis, and I hope the previous 2 sections have been useful thus far in reviewing the company.
I was hoping to get some constructive criticisms but thus far there have been no comments given on either Part 1 or Part 2; so now I am pressing on with Part 3 which is much more qualitative in nature.
Part 3 will discuss the prospects of each division (i.e. Oilfield Engineering and Engine Systems), as well as comment on the prospects and likely business climate for each division and for the Company as a whole in the next 6 months (till MTQ release their 1H FY 2011 results). I will also touch briefly on MTQ’s capital structure in the near-term and their likely cash flow and dividend stream.
Oilfield Engineering Division
Oilfield Engineering has always been the mainstay of MTQ’s business, as my analysis of purchase had described, they are one of the few played in the region which can provide timely and quality service to customers, thereby resulting in repeat business with a loyal customer base. Looking at the results for FY 2010 though, one can see the damage done by the global financial crisis on this division, as oil majors had drastically decreased their spending on E&P amid tight financing conditions; and also because most of these majors have become cautious on spending too much in case they were unable to sufficiently recoup their investments. Note too that oil prices had collapsed from a high of about US$148 per barrel to the current US$70 per barrel, and there could be further weakness moving forward due to the current Euro crisis. MTQ are, to a certain extent, exposed to this risk as they are servicing clients in the South-East Asian region where the players are more sensitive to oil prices. However, there may be light at the end of the tunnel in terms of managing the volatility of the revenue stream for this division (see next para).
In Jan 2009, MTQ announced that they were venturing into Bahrain, a country in the Middle East, and were planning to build a new facility there up to 3 times the size of their Singapore Pandan Loop operations. Since then, they had awarded a contract to build Phase I of the development to a contractor, and work has since begun and is targeted to be completed by early 2011. Assuming the facility starts to attract customers and generates revenues, the revenue stream would be far more stable as the oil majors in the Middle East region are not so affected by fluctuating oil prices; rather their cost of production is probably just US$1 to US$2 per barrel! MTQ would also be able to capture a new base of customers there (barring strong competition from incumbent players, of course) and perhaps also extend their existing business relationships with their current pool of customers to service their Middle Eastern operations. Of course, at this juncture there is still no clarity on business prospects and potential revenues as the facility is under construction; but if assuming all goes well, this new facility could significantly boost MTQ’s business in the long-term. Read more...
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We have come to Part 3 of my MTQ analysis, and I hope the previous 2 sections have been useful thus far in reviewing the company.
I was hoping to get some constructive criticisms but thus far there have been no comments given on either Part 1 or Part 2; so now I am pressing on with Part 3 which is much more qualitative in nature.
Part 3 will discuss the prospects of each division (i.e. Oilfield Engineering and Engine Systems), as well as comment on the prospects and likely business climate for each division and for the Company as a whole in the next 6 months (till MTQ release their 1H FY 2011 results). I will also touch briefly on MTQ’s capital structure in the near-term and their likely cash flow and dividend stream.
Oilfield Engineering Division
Oilfield Engineering has always been the mainstay of MTQ’s business, as my analysis of purchase had described, they are one of the few played in the region which can provide timely and quality service to customers, thereby resulting in repeat business with a loyal customer base. Looking at the results for FY 2010 though, one can see the damage done by the global financial crisis on this division, as oil majors had drastically decreased their spending on E&P amid tight financing conditions; and also because most of these majors have become cautious on spending too much in case they were unable to sufficiently recoup their investments. Note too that oil prices had collapsed from a high of about US$148 per barrel to the current US$70 per barrel, and there could be further weakness moving forward due to the current Euro crisis. MTQ are, to a certain extent, exposed to this risk as they are servicing clients in the South-East Asian region where the players are more sensitive to oil prices. However, there may be light at the end of the tunnel in terms of managing the volatility of the revenue stream for this division (see next para).
In Jan 2009, MTQ announced that they were venturing into Bahrain, a country in the Middle East, and were planning to build a new facility there up to 3 times the size of their Singapore Pandan Loop operations. Since then, they had awarded a contract to build Phase I of the development to a contractor, and work has since begun and is targeted to be completed by early 2011. Assuming the facility starts to attract customers and generates revenues, the revenue stream would be far more stable as the oil majors in the Middle East region are not so affected by fluctuating oil prices; rather their cost of production is probably just US$1 to US$2 per barrel! MTQ would also be able to capture a new base of customers there (barring strong competition from incumbent players, of course) and perhaps also extend their existing business relationships with their current pool of customers to service their Middle Eastern operations. Of course, at this juncture there is still no clarity on business prospects and potential revenues as the facility is under construction; but if assuming all goes well, this new facility could significantly boost MTQ’s business in the long-term. Read more...
