Hdbs tanjung offshore 20060613 initiate


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Hdbs tanjung offshore 20060613 initiate

  1. 1. Company FocusCompany FocusDBS Group Research . Equity . MalaysiaMalaysia Equity Research PP 11272/7/2006 XX March 2006 13 June 2006BUY RM2.34 KLCI: 914.51 Tanjung Offshore An emerging oil & gas service providerPrice Target : 1-year RM3.00Reason for Report : Initiating coverage Story: We initiate coverage on Tanjung Offshore Berhad (TOFF)Potential Catalyst: Abundant oil & gas with a BUY recommendation. Target price is set at RM3.00, basedopportunities for local operators in Malaysia, on sum-of-parts valuation. TOFF is essentially a local oil & gas (O&G)sizeable new contracts service provider that offers marine charter operations, drilling rigs services, engineering equipment and maintenance services to the oilANALYST majors in Malaysia.Malaysia Research Teamgeneral@hwangdbsvickers.com.my Point: TOFF has strong growth prospects, because it is strategically entrenched to ride on the vast opportunities in theFORECASTS AND VALUATION upstream O&G industry in Malaysia. TOFF should benefit from theFY Dec (RMm) 2005A 2006F 2007F 2008F improving marine charter and drilling rates over the next few years,Turnover 205.5 260.2 348.5 353.5 and has the opportunity to expand its fleet with the need forEBITDA 12.8 26.8 41.0 43.3 Malaysian-flagged vessels. Of the estimated 250 vessels operating inPretax Profit 11.6 18.8 28.6 29.7 Malaysian waters, only 75-80 are locally-flagged. TOFF is alsoNet Profit 16.1 16.9 25.7 26.7 primed to benefit from Petronas’ move to accelerate theNet Profit ex. EI 16.1 16.9 25.7 26.7EPS - FD (sen) 19.1 15.7 23.6 24.5 development of marginal fields in Malaysia, for it has the expertise,EPS - FD (sen) ex. EI 19.1 15.7 23.6 24.5 strategic partnerships and track record to offer such services in theNet profit Gth (%) 93.0 4.8 52.4 3.8 field.PE (x) 12.8 15.6 10.4 10.0P/Cash Flow (x) 12.4 9.4 6.2 5.8 Relevance: Based on current orderbook and locked-in charterEV/EBITDA (x) 23.6 11.3 7.4 7.0 rates, we expect net profit of RM17m for FY06, and a higherDPS (sen) 3.0 3.0 3.0 3.0 RM26m for FY07 (+53%), which translates into FD EPS of 16 sen andDiv Yield (%) 1.2 1.2 1.2 1.2Net Gearing (%) 56.0 153.5 111.6 83.6 24 sen, respectively. At current levels, the stock is trading at 28%ROE (%) 22.2 19.3 23.1 19.6 discount to our target price, with room for upgrade if severalBook Value (RM) 0.86 1.04 1.32 1.61 tenders are awarded to TOFF in the next few months.P/Book Value (x) 2.8 2.4 1.9 1.5 2-year CAGR pretax profit growth of 57% p.a from FY06-07. This is fueled by its fleet expansion program and higher charter & rigs rates.SHARE PRICE CHART Marine and drilling operations will be the primary growth drivers, RM accounting for a combined 44-53% of Group revenue and 58-79% of3.00 EBIT for FY06-07. Complementary businesses such as engineering TANJUNG OFFSHORE equipment and maintenance services will play a secondary role.2.50 Delivery of 4 new vessels will be growth catalyst. Earnings will be2.00 driven by additional vessels coming into operation and rising charter1.50 rates. TOFF is on track to take delivery of 4 new vessels (4,962bhp 100 DAY MA supply vessels) in 2006, which is 62% completed. The 4 newbuilds1.00 Jun-05 Aug-05 Oct-05 Dec-05 Feb-06 Apr-06 Jun-06 will expand its fleet to 8 vessels. Charter rates surging due to acute shortage of rigs worldwide.AT A GLANCEIssued Capital (m shrs) 92.8 Demand for rigs remains strong, as reflected in rig charter rates,Mkt Cap (RMm/US$m) 217.2 / 60.3 which has been rising steadily from US$45,000/day in 1999 toMajor Shareholders (%) US$125,000/day now. This is reflected in TOFF’s recent contract Omar Bin Khalid 44.2 extension with Shell, which has agreed to a higher charter rate of Abdullah Bin Hashim 14.9 US$142,000/day, effective 7 Nov 2006 to 31 Jan 2007.Free Float (est.) 30.0 Rising oil prices make exploration of marginal fields moreAverage daily volume (m’shrs) 0.09 economical. Armed with products like MOPU (Mobile Offshore Production Unit) and TARPON system, TOFF (backed by its trackEarnings Rev : None record) is the Malaysian service provider that is capable of offeringConcensus EPS: FY06: 20.0sen; FY07: 30.1sen such services in the field. Note that its maiden MOPU contract worthVariance vs Cons: FY06: -20.3%; FY07: -21.6% RM85m will kick-off from June 2006 onwards until June 2014.Sector: Oil & gasBloomberg/Reuters Code: TOFF.MK / TOF.KLPrincipal Business : Oil & gas service providerRefer to important disclosures at the end of this report.
  2. 2. Company Focus Tanjung Offshore Background Founded in March 1990, TOFF started off as a contract drilling service provider, collaborating with a Norwegian offshore drilling operator, Odjfell Drilling & Consulting Co. to provide drilling services for exploratory and development wells in Malaysia. Since then, it has expanded into engineering equipment and spare parts services in the mid 90s through tie-ups with various global and renowned principals in the oil & gas sector. TOFF’s entry into the marine services operations came in 1995, where it undertook chartering services for marine vessels on a leased basis. Since then, TOFF has developed into an integrated oil & gas service provider of reputable size. To-date, TOFF has grown to become a reputable integrated oil & gas service provider in the domestic oil & gas industry and the Group’s operations can be categorized into 4 key activities; marine vessels services, rig & platform services, engineering equipment operations and maintenance services. Comparatively speaking, TOFF’s business model is most similar to Petra Perdana (Petra) except that the latter has no rig & platform service operations. Fleet-wise, Petra has a larger fleet of vessels; 23 units vs. TOFF’s 8 but most of its vessels are relatively old, averaging >20years versus TOFF’s 1-2 years old. Listed on the 2nd Board in 2005. TOFF was subsequently listed on the 2nd Board of Bursa Malaysia on 27 May 2005, at an Initial Public Offer (IPO) price of RM1.30 per share. Operational activities of TOFF Tanjung Offshore Engineering Vessel Rig & Platform Maintenance Equipment Services Services Services Source: Company Location of business Kuala Lumpur Head office, handles all administrative, financial and communication matters. Recently set up a Controls & Instrumentation division (CID). Teluk Kalong & Kemaman Support office for marine operations at the Kemaman Supply Base, Supply Base Terengganu. Has a complete operations centre for maintenance, repair works and warehousing for equipment and spare parts at Teluk Kalong. Miri Workshop and support centre for East Malaysia. Manjung & Pasir Gudang Support centre for the provision of maintenance services to the Royal Malaysian Navy and power generation plants within the vicinity. Labuan New operations centre with maintenance facilities. Source: Company 2 of 22
  3. 3. Company Focus Tanjung Offshore TOFF Corporate Structure Tanjung Offshore Investment Holding Ship management 100% Tanjung 100% Tanjung Integrated service provider & ownership of Kapal S/B Offshore S/B to the oil & gas and related vessels industries 100% Tanjung 98% Tanjung 65% Tanjung 50% Forsayth Petroconsult S/B Maintenance S/B NewEnergy S/B Offshore Pte Ltd Engineering and Maintenance Project management Ownership of vessel professional services services MV Tanjung Jara manpower services Source: Company Controlled by experienced management team... The major shareholders of TOFF are Haji Omar Bin Khalid and Haji Abdullah Bin Hashim, each holding 44.2% and 14.9% equity stakes in the Company. Haji Omar and Haji Abdullah are co-founders of TOFF and are the Managing Director and Finance Director of the Company. Very strong working relationship with Petronas. We understand that the management of TOFF has very healthy and strong working relationships with Petronas’ operations and management. 3 of 22
  4. 4. Company Focus Tanjung Offshore Directors’ Profiles Y.B Senator Datuk Wira Syed Senator Datuk Wira Syed Ali is a holder of Professional Diploma in Ali Bin Tan Sri Syed Abbas Leadership and Management by the New Zealand Institute of Alhabshee, 44 Management, New Zealand and is a member of the Society of Business Practitioners, UK. (Chairman) Presently a chairman of Yayasan Pendidikan Cheras and also serves as a director of several public and privates companies; Composites Technology Research Malaysia Sdn Bhd (CTRM), IIUM Holdings Sdn Bhd and C.I. Holdings Berhad. Haji Omar Bin Khalid, 51 Haji Omar is a graduate of Eastern Michigan University, USA and holds a degree of Business Administration (Finance) and a Diploma in Accountancy (Managing Director) from Institute Teknologi Mara (now known as Universiti Teknologi Mara). Started out as an auditor with Arthur Young & Co in 1975 and subsequently moved to Bank Kewangan as a Finance Manager. Co-founded TOFF with Haji Abdullah Bin Hashim in 1990 and has over 15 years of experience in the Malaysia’s oil & gas industry. Developed strong working relationships with Petronas’ operations and management. Currently a member of Akademi Laut Malaysia and a trustee member of Yaysan Pendidikan Cheras, Kuala Lumpur. Haji Abdullah Bin Hashim, 52 Haji Abdullah holds a Bachelor in Accountancy from University of Central Lancashore, UK. A qualified Chartered Accountant and a member of the (Finance Director) Malaysian Institute of Accountant since 1995. Joined Arthur & Young & Co in 1977 and subsequently moved to Lembaga Tabung Haji, Yayasan Pelajaran Mara and Rakyat Corporation Sdn Bhd before joining Bank Kerjasama Rakyat Malaysia in 1993. Co-founded TOFF with Haji Omar. Presently a Board member of Golden Plus Holdings Berhad, a public listed company involved in investment and property management, Managing Director of Amona Permodalan Holdings Sdn Bhd, an investment holding company with interests in property development. Haji Hamidon Bin Md Khayon, An engineer by profession, Haji Hamidon is a graduate from Colorado School 37 of Mines, USA and holds a degree in Petroleum Engineering. (Executive Director) Started off his career as a Drilling Fluid engineer with BW Promud Sdn Bhd in 1993 and joined Antah Baroid Sdn Bhd as Drilling Fluids Specialist Sales & Services a year later, covering the ASEAN operations. He subsequently joined TOFF in 1995 as a Project Sales Engineer and appointed to the Board of Directors in 2005. Presently a member of Malaysia Oil & Gas Engineering Consultants. Y.B Haji Ab. Wahab Bin Haji He is a chartered accountant, a member of the Malaysian Institute of Ibrahim, 54 Accountants and holds a Diploma and Advanced Diploma in Accounting from University Technology Mara. Independent Non-Exec. Director Began his career in the Corporate Finance division at Petronas in 1978 and later assumed the role of Finance Manager for Petronas Gas. Reassigned as Chairman of the Audit Head of the Finance and IT division of the Oil, Gas and Petrochemical Technical Committee Services in 1996 following the successful listing of Petronas Gas. Haji Ab. Wahab is also active in politics as well as social and community services. Edwanee Cheah Bin Abdullah, Holds a Masters in Business and Administration (Technology) from Deakin 55 University and is a Member of Association of Professional Engineers, Scientists and Managers, Australia. Independent Non-Exec. Director Has over 30 years of international experience in the energy sector and has served various business units of the Royal Dutch Shell Group in Europe, USA, Africa, Middle East and Asia. Source: Company 4 of 22
  5. 5. Company Focus Tanjung Offshore Profile of Senior Management Zaaba Bin Sidek, 42 Manages the technical and commercial matters, day-to-day issues on gas turbines and compressors maintenance contract negotiations as well as Manager, After-market overseeing implementation. services Muhammad Sabri Bin Ab. A mechanical engineer graduate of School of Mechanical and Offshore Ghani, 34 Engineering, The Robert Gordon University Aberdeen and holds a Diploma in Petroleum Engineering from University Teknologi Malaysia. Senior Manager, Application engineering The Project Manager for the gas turbine compression package for Sarawak Shell in Central Luconia Gas Field Develpoment and the Resak Platform gas compressor packages for Petronas Carigali. Joachim Tan Seow Hoe, 31 Holds a Bachelor of Management Studies (Honours) from University of Waikato, NZ and is a member of the Institute of Chartered Accountants of Manager of Corporate New Zealand (ICANZ) and MIA. Finance Mainly involved in managing and overseeing all corporate exercises. Source: Prospectus Respectable institutional followings. 17.6% of the shares are held by local and foreign institutional funds. Atlantis Asian Recovery Funds Plc. holds a 4.3% shareholdings in TOFF whilst Public Mutual, Great Eastern Life Assurance (Malaysia) and Prudential Financial Asia Pacific Funds, just to name a few, ranks among 30 of its largest shareholders to-date. To-date, foreign shareholdings account for 4.9% of total shareholders. Overview of core operations (i) Offshore marine charter operations Domestic vessel operator. TOFF is among the selected few ‘bumiputra contractors’ licensed by Petronas that provide marine support services in Malaysian waters. It commenced its marine charter services in 1995 by chartering an anchor handling tug supply (AHTS) vessel for Carigali Triton Operating Company Sdn Bhd (CTOC). Current owner of 4 vessels. Since then, it has expanded its fleets of vessels and is now the owner of 4 vessels, which comprise of 3 AHTS and 1 utility vessel, servicing oil majors like Petronas Carigali, ExxonMobil Exploration and Production Malaysia Inc (EPMI), Talisman Malaysia Limited (Talisman), just to name a few. Of the current 4, ’MV Sea Eagle’ is presently leased from Gulfmark Offshore Inc. whilst MV Tanjung Jara is co-owned with CH Offshore, with an equal 50:50 stake. Both MV Tanjung Huma and MV Tanjung Manis, fully-owned by TOFF are newbuilds, delivered in 2005. Vessels are fully deployed. Except for MV Tanjung Manis, which is currently on spot charter, the other 3 vessels are on long-term contracts. Note that spot rates are generally 12-15% higher than long-term charter. However, long-term charter offers stability in higher utilization rates and locked-in cashflows. To double fleet size to 8 vessels by end 2006. Considering that demand for local-flagged vessels remains ever strong, TOFF is leveraging on the shortage of such vessels by commissioning the construction 4 new straight supply vessels (SSVs), thus expanding its size to 8 vessels. Construction for the 4 vessels was awarded to Muhibbah Engineering and MSET Shipping for a sum of RM140m, or RM35m each. TOFF is on track to take delivery of the 4 vessels by 4Q06, for construction of the vessels are already 62% completed. Functions of AHTS and supply vessel Vessel Description AHTS Moving of drilling rigs, fire-fighting, provision of supply and transportation of equipment, cargo pipe, cement, fuel, oil and freshwater between operation centres and offshore platforms and facilities. Supply vessel Transport manpower, fresh water, diesel oil, bulk cement, barite, liquid mud, base oil, brine, drill water, deck cargo, materials and equipment. Provides towage duties. Source: Company 5 of 22
  6. 6. Company Focus Tanjung Offshore To take deliveries of the 4 vessels by Jul-Oct 2006. MV Tanjung Pinang 1 & 2 are scheduled for completion by mid-July and early August 2006 whilst TOFF will take delivery of MV Tanjung Pinang 3 & 4 by a later Aug & Oct 2006 respectively. The 4 new vessels have yet to be contracted out but TOFF is in an advanced stage of negotiations with several oil majors in securing long-terms contracts. Details of vessels Vessel Built year/ Details Client (s) Charters Contract acquired*/leased** Own MV Tanjung Jara 2003* 8,000HP AHTS; 59m EPMI Long 5-year contract, 50%-owned term expires in 2008 MV Tanjung Huma Aug 2005 5,428HP AHTS; 60m PCG Long 3-year contract, 100%-owned term expires in 2009 MV Tanjung Manis Jul 2005 3,484HP utility EPMI, PCG, Spot Spot 100%-owned vessel; 45m Talisman MV Tanjung Pinang 1 62% completed @ 4,962HP straight t.b.a t.b.a t.b.a (built by Muhibbah Engr) May 2006 supply vessel; 60m MV Tanjung Pinang 2 62% completed @ 4,962HP straight t.b.a. t.b.a. t.b.a. (built by Muhibbah Engr) May 2006 supply vessel; 60m MV Tanjung Pinang 3 62% completed @ 4,962HP straight t.b.a t.b.a t.b.a (built by MSET) May 2006 supply vessel; 60m MV Tanjung Pinang 4 62% completed @ 4,962HP straight t.b.a. t.b.a. t.b.a. (built by MSET) May 2006 supply vessel; 60m Leased MV Sea Eagle 1976/ 2002** 3,850HP AHTS; 51m EPMI Long Spot term Source: Company Fleet expansion program is expected to continue beyond 2006. Over the longer period, TOFF is committed to expanding its vessels size by capitalizing on the demand for domestic marine support vessels, with a preference for Malaysian-flagged vessels of larger newbuilds. Note that it is an open policy by Petronas to promote greater local participation in the oil & gas services in Malaysia. May take delivery of another 2 new vessels by 2008, which would expand its fleet by to 10 units. We suspect TOFF will be looking out for vessels of higher horsepower (HP) with >10,000HP, which should command better charter rates and operating margins, although we stress that the view is independently ours. The marine charter business will provide the catalyst to earnings growth over the next 2 years. For 2006, TOFF will see full-year contributions from MV Tanjung Manis and MV Tanjung Huma whilst 2007 will see earnings kicking-in for the 4 SSVs. Earnings should accelerate if TOFF manages to secure higher charter rates and manages additional vessels on a leased basis. All in, we expect the division to contribute a substantial 36-59% of TOFF’s EBIT in FY06-07 respectively. 6 of 22
  7. 7. Company Focus Tanjung Offshore Graphics of TOFF’s vessels MV Tanjung Jara MV Tanjung Huma MV Tanjung Manis MV Tanjung Pinang 1 (Mid Jul, 06) MV Tanjung Pinang 2 (Early Aug,06) MV Tanjung Pinang 3 (End Aug, 06) MV Tanjung Pinang 4 (Early Oct, 06) Source: Company (ii) Rigs & platform services Rigs operations to ride on rising rates… TOFF is 1 of the only 4 local players that offer drilling rigs services in Malaysia. In Malaysia, TOFF is the exclusive agent of a jack-up rig (owned by Pride Offshore Inc., the largest rigs operator in the world, owning 280 rigs), which is currently chartered out to Sarawak Shell. Sarawak Shell has been a client of TOFF for the rigs services since 1999. Stronger rig rates to charter growth. Demand and utilization rate for rigs will rise over the next few years driven by higher drilling activities. This translates into improving day rates, which is of great benefit to TOFF. Shell’s extension of rig contract at above-market rates underlines tight supply of rigs. TOFF has recently received a ‘lucrative’ 3-month contract valued at RM46mextension from Sarawak Shell to provide drilling rig operations in East Malaysia. The contract, which runs from 7 Nov 2006 to 31 Jan 2007, is valued at a daily charter rate of US$142,000, comparatively 15% higher than the current market rate of US$125,000 per day. The substantial rate hike is not surprising, for there is currently an acute shortage of rigs worldwide. 7 of 22
  8. 8. Company Focus Tanjung Offshore Contracted rigs rates from 1999 – present (US$/ day) Contracted daily rig rates (1999 - Jan 2007) 142,000 140,000 120,000 100,000 80,000 55,000 57,000 59,000 60,000 60,000 45,000 48,000 50,000 52,000 40,000 20,000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: Company TOFF earns a higher 3% of rig rates. TOFF’s profits take the form of a percentage of rig rates. The charter rate is presently 2.0% of rig rates, but will rise to 3% when the revised contract takes off in Nov 2006. Benefits to TOFF are 2-fold i.e. from the higher charter rates and higher percentage of sharing from the rate itself. In negotiation for improved terms. With demand for offshore rigs on the rise due to increasing drilling activities, we understand that Shell has begun negotiations with TOFF for a contract extension running over the current Jan 2007 period. 8 of 22
  9. 9. Company Focus Tanjung Offshore Demand for MOPU & TARPON Systems will improve as greater emphasis is given to the development of marginal fields and matured assets in a buoyant oil price environment Rising oil prices have created ‘new opportunities’ for the development of matured asset and marginal fields. The prevailing high oil prices has undoubtedly accelerated Petronas’ efforts in enhancing oil recovery in matured, abandoned and marginal fields, for it has become economically viable to extract oil from such fields, in view of the low production cost of an estimated US$25-35/barrel per field. 25 marginal fields with ‘90 potential hotspots’ are to be developed by 2009. It is estimated that in Malaysia, about ’90 hotspots’ have been identified as marginal fields potentials and are expected to be developed between now and 2009. TOFF stands to benefit from Petronas’ commitment in enhancing oil recovery (EOR) at these matured, abandoned marginal fields for TOFF is able to offer 2 of several specialised offshore-drilling techniques for such fields. TOFF’s MOPU & TARPON System to fuel marginal field development. TOFF is capable of engaging in 2 methods ‘with remarkable track records to boot’ for marginal fields. It offers:- i) Mobile Offshore Production Unit (MOPU); and ii) TARPON System. The other ‘proven’ methods for the extraction of oil from marginal fields in Malaysia are the FSO & FPSO vessels and sub-sea processing facilities. MISC is currently the owner of 3 FPSOs and 3 FSOs Crude oil prices (2000 to present) 80 70 60 50 40 30 20 10 0 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Source: Bloomberg 9 of 22
  10. 10. Company Focus Tanjung Offshore Mobile Offshore Production Unit (MOPU) MOPU MOPU Jack-up rig Source: Company About MOPU. MOPU is a jack-up drilling rig, which is converted into an oil & gas production platform and it is designed to operate as a stand-alone oil & gas processing facility. Oil & gas processed on a MOPU is then typically stored and transported onshore in an FSO. MOPU is cost effective, flexible and requires shorter construction period. We believe Petronas Carigali’s greater preference for MOPU concept over conventional rigs for small, marginal fields’ development reflects its interest in pursuing necessary cost-efficient solutions. The preference for MOPU to conventional rigs is greatly justified, for it wins hand-down in terms of costing, timing of delivery and flexibility. 10 of 22
  11. 11. Company Focus Tanjung Offshore Advantages of a MOPU vs. a conventional rig MOPU is a cheaper alternative for marginal field operations. The MOPU (used for the Cendor field) costs US$39m, which is a fraction to a conventional rig, which averaged US$150m per unit. Faster to commission for MOPU takes only 8-12 months versus 3 years for a conventional rig, thus enhances oil recovery (EOR) operations. MOPU is mobile and is able to operate as a stand alone process facility for a long period, utilizing a low cost submerged flexible pipeline to a FSO. A conventional rig operation is less flexible, heavy and requires AHTS for transportation. Enables operators to deal with a number of reservoir uncertainties in a highly cost-effective manner that was not previously conceived. Description MOPU Conventional rig Cost: US$39m US$150m Construction period: 8-12 months 36 months Extraction rate: Comparatively lower Comparatively higher Design Very flexible, enables operators to deal Less flexible. with a number of reservoir uncertainties in a highly cost-effective manner. Source: Company, Hwang-DBS Vickers Research First Malaysian service provider to be awarded MOPU. In June 2005, TOFF was awarded its maiden RM85m contract by Petrofac (Malaysia) for the provision of a MOPU for 2 years (effective June 2006 to June 2008) with a 6-year extension option. Petrofac operates the Cendor Field Development Project, Block PM-304, for its partners Petronas Carigali, Kuwait Petroleum Exploration and PetroVietnam Investment Development. MISC will supply the FSO for this project. About Cendor oil field in Block PM304. The oilfield is located at the northeast corner of PM 304, with water depth of about 70 metres, with principal producing horizons in the H Group of Middle Miocene sands. Cendor has gross production rate of 12,000 barrels per day (bpd) whilst reservoir size is estimated at 17- 25m barrels of oil with significant upside potential. First oil from the field is scheduled for Jul 2006. Details of Cendor field Operator Equity stake (%) Petrofac Group 30% Petronas Carigali 30% Kuwait Foreign Petroleum Exploration Company 25% PetroVietnam Investment Development Company 15% 1st oil Jul 2006 Initial key oil rate (Phase 1) Est. 12,000 bpd Long term key oil rate Est. 25,000 bpd Field life for Phase 1 8-10 yrs Estimated reservoir size: 17-25m barrels of proven oil reserves >50m barrels of probable oil reserves Source: Company, Hwang-DBS Vickers Research 11 of 22
  12. 12. Company Focus Tanjung Offshore About Petrofac. Petrofac, a public listed company on the London Stock Exchange, is a well-known international surface facilities solutions provider serving the oil production, oil refining, natural gas and petrochemical industries. Petrofac has 3 main operations, namely the engineering & construction, operations services and resources (a strategic investment arm with oil majors) divisions. Petrofac is a relatively newcomer to Malaysian waters, having entered into Malaysia in June 2004 following the acquisition of a 30% equity stake in the Cendor oil field in Block PN304 off Peninsular Malaysia from Amerada Hess. Has extensive marginal fields experience in North Sea. What is of interest here is that Petrofac is capable in offering the expertise in developing ‘mature’ oil fields at effective developmet cost that commensurate wih the size of oil reserves. Note that Petrofac has over 20 years of proven experience with mature oil fields in the North Sea fields, where it focuses on incremental production with careful risk mitigation rather than large scale investment. As such, the experience and business solutions that Petrofac offers appeals to Petronas in its search for partnerships to rejuvenate mature assets or marginal fields. On a joint-venture (JV) basis for the construction of MOPU. Given the huge capital outlay of US$39m (RM146m), TGO has set up a SPV with Global Process Systems (AP) & HL Engineering S/B with stakes of 10:70:20 respectively to undertake the construction of the MOPU. TOFF’s principal, Pride Offshore will provide the jack-up rig for conversion into MOPU whilst Global Process Syatems will offer turnkey capability in all areas of process equipment supply. It will take the lead for the construction of the MOPU. HL Engineering will offer its fabrication facilities and TOFF will bareboat charter the MOPU to PEtrofac. Under the contract agreement, TOFF receives 2 sources of income from the MOPU operations. TOFF will receive an annual dividends of US$0.5m (RM1.8m) from the SPV, based on its 10% stake. Receives a 3% of the daily charter rate of US$US$42,000 or revenue of RM1.7m p.a. The SPV is unable to charter the MOPU for it has no license to undertake such services. All in, the MOPU will contribute about RM2.4m to TOFF’s net profit p.a, based on its 10% stake in SPV, 3% daily charter rate of 330 days. Sensitivity of MOPU’s SPV stake and charter rates to earnings % stake in SPV Est. earnings (RM’m) 10% 1.3 15% 1.9 20% 2.6 % of charter rates Est. earnings (RM’m) 3% 1.1 4% 1.4 5% 1.8 Source: Hwang-DBS Vickers Research Not ruling out the possibility of raising its stake in SPV. Our sensitivity analysis suggests that a 5% increase in the SPV would increase its profits by RM0.6m (before taking account the interest cost). Bidding for one more MOPU. Should the Cendor project progress positively, the likelihood of TOFF clinching a similar MOPU contract with another oil operator in Peninsular Malaysia will improve immensely. As we understand, a bid has been submitted although results remain inconclusive. 12 of 22
  13. 13. Company Focus Tanjung Offshore About TARPON GUYED system. The TARPON system is a patented product of Acergy Group Tarpon division (formerly known as Stolt Offshore) and is uniquely designed for water depth that ranges between 75 ft and 300 ft, which allows it to be applied at a series of potential development locations. Field criteria Description Water depth: 75 – 350 ft Topside loading weight: Less than 400 tonnes Conductor slots Less than 8 Source: Company Various views of a TARPON SYSTEM TARPON TARPON Source: Company Major components of the TARPON system Central caisson Termination clamp Boat landing Anchor piles (3) Guy cables (6) Rod and block cable tensioning assemblies Topside (optional) Source: Company 13 of 22
  14. 14. Company Focus Tanjung Offshore The advantages of TARPON over monopods and tripod. The system is a low-cost solution for marginal field development due to its simpler construction and design capabilities. The TARPON system is best utilized for topside loading of <400 tonnes. Depending on the field requirement, the TARPON system can handle heavier topside but it will lose its competitiveness. The TARPON system can be delivered within 6-8 months period, based on conventional fabrication method. TARPON is also practical, for offshore installation is relatively easy and fast. 3 practical reasons for using the TARPON system Low cost solution for marginal field development & matured assets Fast delivery within a 6-8 month period Installation is relatively easy and fast Source: Company For remote oilfield operations, the TARPON system is connected to an FPSO whilst the system is tied-in to a central processing platform (CPP) for existing facilities. Landscape of development Application Remote/ virgin oilfield TARPON + FPSO Existing oilfield with existing facilities TARPON + CPP Source: Company TARPON System has been in existence for over 20 years but…The system was widely used in the North Sea since the 80s by oil majors like PENNZOIL, PetroQuest Energy, AMOCO, Canadian OXY, with over 30 installations to-date. …but is relatively new in Malaysia. The system was first used at the Semarang Kecil oil field in 2000 and was later applied at the North Lukut and Penara oilfields in 2002 and Ledang Anoa in 2006. TARPONS’ track record in Malaysia Field: Semarang Kecil North Lukut Penara Ledang Anoa Date: 2000 2002 2002 2006 Water depth: 53m (180 ft) 61m (200 ft) 61m (200 ft) 79m (260 ft) Conductors: 2+1 5+1 5+1 2+1 Topside: 250 tonnes 280 tonnes 280 tonnes 250 tonnes Application: TARPON + CPP TARPON + FPSO TARPON + FPSO TARPON + CPP Source: Company TOFF’s net profit margin here is estimated to be 12-14%. Essentially, TOFF provides the engineering expertise in terms of design, while the rig will be fabricated by Malaysia Marine & Heavy Engineering Sdn Bhd (MMHE), a 65% subsidiary of MISC Berhad (MISC). Bidding for more TARPON contracts. With TARPON gaining greater acceptance in Malaysia, TOFF is midst of bidding for 2-3 new TARPON contracts worth ~RM60m, to be awarded by Petronas Carigali. 14 of 22
  15. 15. Company Focus Tanjung Offshore Engineering equipment & spare parts Licensed by Petronas. TOFF is licensed by Petronas under the Vendor Development Program to supply engineering equipment and spare parts to the oilfield operators in Malaysia. TOFF’s principals in these operations are as follows:- Major Principals & description of products Principal: SIEMENS Length of relationship: 4 years Details: Supply of industrial gas turbines, compressors and rotating motors for mechanical drive and power generation. Client: PCG, Sarawak Shell, Sabah Shell, EPMI. Principal: ABB Length of relationship: 8 years Details: Supply of distributed control system, fire & gas systems and shutdown systems for platforms. Client: PCG, Sarawak Shell, Sabah Shell, Talisman, EPMI, Murphy Oil. Principal: GLOBAL PROCESS SYSTEM (GPS) Length of relationship: 6 years Details: Provision of complete turnkey capability in all areas of process equipment supply, such as Water Injection System, Produced Water Treatment System and Gas Dehydration System. Client: PCG, Sarawak Shell, Sabah Shell, Talisman, Murphy Oil. Principal: STORK H&E TURBO BLADING CORPORATION Length of relationship: 4 years Details: Manufacturer & supplier of rotating and stationary blading for steam and gas turbines nad axial compressors. Client: PCG, Sarawak Shell, Sabah Shell, Talisman. Principal: SEVERN GLOCON Length of relationship: 5 years Details: Supply of industrial gas turbines, compressors and rotating motors for mechanical drive and power generation. Client: PCG, Sarawak Shell, Sabah Shell, EPMI. Principal: FLOWGUARD Length of relationship: 6 years Details: Supply control pressure and pulsation dampeners. Client: PCG, Sarawak Shell, Sabah Shell, EPMI. Principal: NORDIC OFFSHORE Length of relationship: 4 years Details: Provide 2-D seismic studies. Client: PCG. Principal: TDI BROOKS Length of relationship: 4 years Details: Provide surface geochemistry studies. Client: Amerada Hess, Newfield Sarawak Malaysia, Murphy Oil. Source: Company 15 of 22
  16. 16. Company Focus Tanjung Offshore Products and services rendered. Being part of Petronas’ Vendor Development Program, TOFF is the exclusive agent for various engineering equipment, for O&G platforms and other facilities. In terms of services, TOFF also provides installation layout, planning and implementation, scheduled maintenance, trouble shooting and various after-sales services. Demand for engineering equipment & maintenance operations on the rise. It is estimated that ~65-70 new oil & gas structures and platforms are expected to be built in the Malaysian waters from now until 2009, averaging 16-18 units a year. On average, each platform will require substantial amount of engineering equipment and, maintenance and offshore support vessels over the next 20-25 years. Notwithstanding that, there are also maturing and aged platforms that require major maintenance services. Big revenue contributor but small earnings generator. The engineering equipment division is a leading contributor to TOFF’s sales due to the size of contracts. Sales are recognized on a progressed billings basis, with contracts tend to be of short-term basis, of less than a year period. EBIT margins for the operations have been razor-thin, at 2-4% for TOFF receives a percentage of trading fees. Process flowchart of the engineering equipment, spare parts and maintenance Identification of potential Front-end requirements Engineering of prospective design clients (“FEED”) Implementation Delivery Ascertaining Recommending the Fully involved in production best possible method construction and & operations for the equipment and fabrication phase Maintenance philosophy & parts to be installed specifications of & used new project Constant Regular project Maintenance technical progress schedule discussion meetings drawn up Source: Company Engineering equipment contracts secured since listing Date Description Value Operator Tenure (RMm) 29-May-06 Supply of distributed control systems, safety & fire gas 46.0 Muhibbah Engineering 4 mth systems and field instrumentations 11-Jan-06 Maintenance services for mechanical rotating 80.0 Petronas Carigali 5 yrs equipment at all Sabah & Sarawak offshore platforms 1-Dec-05 Supply of gas compressors for a platform 2.5 Sarawak Shell Berhad 5-6 mth 21-Nov-05 Provision of 1 unit of SIEMENS gas turbine 10.0 Petronas Carigali 3-4 mth 7-Nov-05 Supply of recripocating gaslift compressors to the Abu 7.0 Petronas Carigali 6-7 mth Cluster Development Project 24-Oct-05 Provide general maintenance & mechanical services 3.0 Talisman Malaysia 3+1+1 yrs 18-Oct-05 Provision of high voltage switchgears to a FPSO at 3.0 Malaysia Deepwater 4 mth Kikeh oilfield Floating Terminal (Kikeh) 23-Jun-06 Provision of complete re-blading and refurbishment 4.0 Petronas Carigali 1 mth on the Gas Turbine Generator Rotor Source: Company 16 of 22
  17. 17. Company Focus Tanjung Offshore Corporate exercises under implementation: They include: i) a 1-for-2 bonus. This will involve the issues of 46.m shares (before the exercise of ESOS and conversion of warrants), on the basis of 1 new bonus shares for every 2 shares held. Post bonus issue, TOFF’s share base will increase to 138.6m shares. ii) Ascension to Main Board. The proposed transfer of TOFF’s listing status to the Main Board. We expect the exercise to be completed by 2H2005 Effects of bonus issue to share base Minimum scenario Maximum scenario (‘m shares) (‘m shares) Share base @ Mar 2006 92.6m 92.6 Exercise of ESOS 8.2 Conversion of warrants 18.4 Sub-total 92.6 119.3 1-for-2 bonus issue 46.3 59.7 Enlarged share cap (post bonus) 138.9 179.0 Source: Bursa announcement Other issues Stretching gearing for optimal growth. Net gearing stands at 0.8x as at Mar 2006, on the back of gross cash, debt and shareholders’ funds of RM82m, RM158m and RM92m. However, cash position should fall over the next few months for the purchase of 4 vessels, that are expected to be delivered in 2H06. Cashflows from marine operations will reduce debt. We acknowledge that gearing could be a concern but we believe TOFF is able to bring it down to a manageable level over the next few years, through its strong operating cashflows from marine charters, which is strong & stable (long term contracts). Also, repayment for its RM150m Serial bond, which carries a coupon rate of 4.5%, will commence from 2008 onwards, which is a great boost for TOFF to facilitate the expansion of TOFF’s cash position. Schedule of loan repayment Year Repayment of loans (RM’m) 2006 - 2007 - 2008 20.0 2009 20.0 2010 25.0 2011 25.0 2012 30.0 2013 30.0 Total 150.0 Source: Company Sub-par tax rate. Note that TOFF has been enjoying minimal tax rate (<1%) versus statutory tax of 28%, benefitting greatly from the deferred tax assets arising from the capital allowances from the purchase of vessels. As such, we incorporate tax rate of 10% in our earnings model through 2009. We anticipate TOFF to enjoy capital allowance of RM140m over the next 5-6 years, or RM23-28m p.a 17 of 22
  18. 18. Company Focus Tanjung Offshore Prospects Quantum leap in earnings with a 2-year CAGR pretax profit growth of 57% p.a from 2006-2007, driven by its fleet expansion program and higher charter & rigs rates enjoyed. Marine and drilling operations will be the key drivers to growth, accounting for a combined 49-62% of the Group’s revenue and 65-79% in EBIT for 2006-07. Growth in 2006 will come mainly from the full year charters of 2 vessels (i.e. MV Tanjung Huma & MV Tanjung Manis) and contributions from MOPU from 2H06 onwards. More earnings upside is expected should TOFF raises its stake in the SPV, which currently stood at 10%. The estimated dividends from the SPV will total US$5m (RM18m) p.a., based on the MOPU contract. For now, our forecast assumes a 10% stake for TOFF in the SPV. Earnings in 2007 should improve on the back of 4 vessels (SSVs), which are expected to be chartered out once the said vessels have been delivered. TOFF should also benefit from the full earnings contributions of MOPU in 2007 versus 6-month in 2006. Earnings could improve on the upside should TOFF: secure additional contracts for TARPONS, MOPU realised higher charter rates for its vessels and drilling rigs enhance its engineering equipment & maintenance orderbooks The bonus issue and transfer to the Main Board should improve liquidity in the market and enhance its investment links among fellow investors. Action Attractive valuations. Valuations are undemanding, for the stock is trading at just 10x FY07 earnings (a year where TOFF will reap the full benefits of its marine & drilling operations). Based on our sum-of-part calculations, we value TOFF at RM3.00. On PE analysis, we derived a fair value of RM3.20, pegging earnings (fully diluted) to a PE of 12x for FY07. Note that our forecasts are at the lower end of consensus’ estimates. Securing new orders and higher charter rates should accelerate earnings, going forward. Sum-of-part valuations Division Value (RM’m) Comment Marine charter services 223 Based on 14x FY07 earnings Drilling operations 55 14x PE for MOPU and rigs operations. A 10% discount is applied to the rigs ops for TOFF is not the asset owner. Engineering equip. ops 36 Assigned a 10x PE multiple for FY07 operations Maintenance services 19 Based on 10x FY07 earnings Sub total 333 Fully diluted share cap 111 Incl. outstanding warrants, totaling 18.5m units SOP 3.00 Discount (%) 23% Source: Company 18 of 22
  19. 19. Company Focus Tanjung Offshore Peer comparison with marine operators in Malaysia & Singapore EPS (sen) PE (x) ROE (%) Company Price YE 06F 07F 06F 07F 06F 07F TOFF 2.34 Dec 15.7 23.6 14.9 9.9 19.3 23.1 Petra 3.14 Dec 28.9 32.9 10.9 9.5 25.0 22.4 CHO* 0.335 Jun 3.6 3.8 9.3 8.8 14.6 18.0 Ezra* 2.28 Aug 11.2 21.3 20.4 10.7 32.8 23.1 Labroy* 1.19 Dec 8.2 9.2 14.5 12.9 24.0 22.9 Source: Hwang-DBSVickers Research, *DBS Vickers TOFF’s Profit & Loss Model FY Dec 2004 2005 2006F 2007F 2008F Turnover 151.8 205.5 260.2 348.5 353.5 - Marine services 8.7 7.4 23.2 47.7 47.7 - Rigs services 52.3 74.0 106.0 169.7 169.7 - Eng equip. & parts 69.5 85.0 85.0 85.0 90.0 - Maintenance services 21.4 39.1 46.0 46.0 46.0 EBITDA 9.9 12.8 26.8 41.0 43.3 Depreciation (0.7) (2.0) (5.2) (10.5) (11.8) EBIT 9.2 10.8 21.6 30.5 31.6 - Marine services 1.5 1.8 7.8 18.0 18.0 - Rigs services 1.8 2.1 4.7 5.9 6.8 - Eng equip. & parts 3.0 3.2 6.0 4.3 4.5 - Maintenance services 2.9 2.0 3.2 2.3 2.3 Interest income 0.0 0.0 0.0 0.0 0.0 Interest expense (0.1) (0.9) (5.8) (5.8) (5.8) Investment income 0.0 0.3 1.6 2.5 2.5 Associates 1.8 1.4 1.4 1.4 1.4 Exceptional items 0.0 0.0 0.0 0.0 0.0 Pretax profit 10.9 11.6 18.8 28.6 29.7 Taxation (2.5) 4.4 (1.9) (2.9) (3.0) Minority Interest (0.0) 0.0 (0.1) (0.1) (0.1) Net profit 8.3 16.1 16.9 25.7 26.7 Source: Hwang-DBSVickers Research Key statistics FY Dec 2004 2005 2006F 2007F 2008F No. vessels deployed (unit) 2 6* 8** 8 8 Avg. operating days 220 183 173 323 323 TOFF’s stake in SPV (%) - - 10 10 10 Charter rates Avg. marine charter rates (bhp) 0.9x 1.1x 1.2x 1.2x 1.2x Avg. rig rates (US$/day) 57,000 59,000 60,000 142,000 142,000 Avg. MOPU rates (US$/day) - - 42,000 42,000 42,000 Note:* 2 new vessels deployed in 4Q05, **4 new vessels to be deployed in 4Q06 19 of 22
  20. 20. Company Focus Tanjung Offshore Balance Sheet Model FY Dec 2004 2005 2006F 2007F 2008F LT assets Fixed assets 38.9 130.4 253.5 278.7 292.6 Current assets 75.3 88.2 96.6 131.4 146.3 Inventories 0.7 1.0 1.4 1.9 1.9 Accounts receivable 35.0 76.6 74.1 98.3 102.5 Cash & ST investment 39.6 10.6 21.1 31.3 41.8 Others 0.0 0.0 0.0 0.0 0.0 Current liabilities 40.2 105.2 117.4 153.6 157.6 Accounts payable 27.5 94.8 106.9 143.2 147.2 Others 6.8 0.0 0.1 0.1 0.1 ST borrowings 5.9 10.4 10.4 10.4 10.4 74.0 113.4 232.7 256.5 281.2 Shareholders funds 56.3 72.6 87.5 111.2 135.9 Paid-in capital 42.0 42.1 42.1 42.1 42.1 Reserve 14.3 30.5 45.4 69.1 93.8 Minority interests 0.0 0.0 0.1 0.2 0.3 Non-current liabilities Long-term debts 17.7 40.9 145.2 145.3 145.3 74.0 113.4 232.7 256.5 281.3 Source: Hwang-DBSVickers Research Cashflow FY Dec 2004 2005 2006F 2007F 2008F Operating cash flow (1.0) (4.3) 39.1 49.7 40.0 Net Profit 8.3 16.1 16.9 25.7 26.7 Depreciation & amortisation 0.7 2.0 5.2 10.5 11.8 Change in working capital (8.2) (13.2) 14.2 11.6 (0.3) Others (1.8) (9.1) 2.9 1.9 1.9 Investment cash flow (39.5) (47.1) (52.5) (50.0) (50.0) Net capex (37.1) (46.9) (52.5) (50.0) (50.0) Change in LT investment (2.5) 0.4 0.0 0.0 0.0 Change in other assets 0.0 (0.6) 0.0 0.0 0.0 Cash flow after invt. (40.5) (51.4) (13.4) (0.3) (10.0) Financing cash flow 55.5 53.7 96.5 (7.8) (7.8) Change in share capital 38.2 40.0 0.0 0.0 0.0 Net change in debt 17.4 23.4 104.2 0.0 0.0 Change in other LT liab. (0.1) (1.8) (7.7) (7.8) (7.8) Net cash flow 15.0 2.4 83.1 (8.1) (17.7) Source: Hwang-DBSVickers Research 20 of 22
  21. 21. Company Focus Tanjung Offshore Descriptions of major approvals, licenses and permits Authority License Description MOF 357-010 037 64 (TMS) Eligible for submission of various tenders for MOF projects to supply 357-020 292 56 (TNE) equipment, machineries and services 357-000 287 47 (TOS) 357-000 287 47 (TOS) Recognition and conferment of bumiputra contractor status. Bumiputra participation in equity shareholdings, board of directors, management and workforce must be > 51%. Renewable every 1 year for Malaysian-flagged vessels and 3-months for non-Malaysian flagged. MOT Domestic Shipping License Petronas L-100697-T (TOS) To supply equipment & services to the oil & gas exploration annd production L-421945-H (TNE) companies L-388449-K (TMS) L-227036-V (TPC) Source: Company APPENDIX: TANJUNG OFFSHORE – HISTORICAL ACHIEVEMENTS Highlights & corporate milestones 1990 Founded Tanjung Offshore Services Sdn Bhd (TOS) in March to provide contract drilling services 1993 Expanded into engineering equipment & spare parts operations 1994 Moved into marine services in May. Chartered vessels on a leased basis 1996 Incorporated Tanjung Maintenance Services Sdn Bhd to provide other support services to the oil & gas industry such as manpower, maintenance & repair works on offshore platforms and onshore power plants. Operations are centred in Kemaman, Terengganu. 1997 Tanjung NewEnergy Services Sdn Bhd was incorporated to provide project management services to the engineering and energy industries. 1999 TOS secured its 1st jack-up drilling rig services to Sarawak Shell in collaboration with Pride International Pte. Ltd. 2000 Tanjung Petroconsult Sdn Bhd commenced operations via its engineering and professional manpower services. 2003 Set-up of 50%-owned Forsayth Offshore Sdn Bhd to acquire MV Tanjung Jara (AHTS). 2005 27 May - Listed on the 2nd Board of Bursa Malaysia. 30 June – Secured 1st Mobile Offshore Production Unit (MOPU) contract from Petrofac (Malaysia PM-304) for the development of Cendor oilfield off the coast of Terengganu. 15 Sep – Took delivery of MV Tanjung Huma 19 Sep – Undertook a private placement via the issuance of 8.4m new shares at an issue price of RM1.90 per share. Issued a RM150m 8-year 4.5% Serial Fixed Rate Bonds with 18.5m Warrants Source: Company 21 of 22
  22. 22. Company Focus Tanjung Offshore This document is published by Hwang-DBS Vickers Research Sdn Bhd (“HDBSVR), a subsidiary of Hwang-DBS Securities Berhad (“HDBS”) and an associate of DBS Vickers Securities Holdings Pte Ltd (“DBSVH”). The research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. HDBSVR accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBS Vickers Securities Holdings Pte Ltd is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. HDBSVR, HDBS, DBSVH, DBS Bank Ltd, and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other banking services for these companies. HDBSVR, HDBS, DBSVH, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc (“DBSVUSA”), a U.S.-registered broker-dealer, may beneficially own a total of 1% or more of any class of common equity securities of the subject company mentioned in this document. HDBSVR, HDBS, DBSVH, DBS Bank Ltd and/or other affiliates of DBSVUSA may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from the subject company. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. DBS Vickers Securities (UK) Ltd is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients. Vincent Khoo, CFA, Director Hwang-DBS Vickers Research Sdn Bhd (128540 U) Suite 13.01, Kompleks Antarabangsa, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia. Tel.: +603 2711-2222 Fax: +603 2711-2333 email : general@hwangdbsvickers.com.my 22 of 22