Mooreast Holdings Ltd. (MOOR SP)
Company Update: 23 November 2021
Debut of an offshore marine company in a niche market
- Mooreast is a total mooring solution provider.
- Its financial performance was stable during 2018-2020 but was negatively impacted by the slowdown in the offshore marine market in 1H21.
- The recovery in oil and gas E&P expenditure could benefit Mooreast in 2022.
- Ongoing growth in demand for renewable energy will be a tailwind for Mooreast in the long term.
| IPO Price | S$0.22 |
| Shares for public offer | 800,000 |
| Shares for placement | 38,050,000 |
| Initial market cap | S$57mn |
| Trading commence | Wed, 24 Nov |
Company Background
Mooreast Holdings provides total mooring solutions to offshore oil and gas, marine and offshore renewable energy industries. It enages in four segments of businesses, namely renewable energy, rigging and heavy lifiting, mooring, and marine supply & services. Its headquarter is in Singapore, and it has a sales office in Rotterdam, Netherlands. The main client base is offshore oil and gas companies such as PETRONAS, ExxonMobil, and Kepple Offshore & Marine.
- Renewable Energy: Provision of mooring solutions for floating wind turbine projects, offshore Solar PV projects and tidal turbine projects in Asia and Europe.
- Rigging & Heavy Lifting: Supply of rigging and heavy lifting equipment to customers in the offshore O&G, marine industries and construction industry in Singapore, including steel ropes, synthetic ropes and chains.
- Mooring: Design, engineering, fabrication, supply, mobilisation and logistics, installation and commissioning, and leasing services for mooring systems and mooring system components.
- Marine Supplies & Services: Supply of marine mooring component products such as anchors, chains, mooring fenders, wire ropes, synthetic mooring ropes and other equipment to the marine industry.
Financial highlights and analysis
The company’s businesses are project-based and order book-driven. Given the nature of its business at the upstream offshore oil & gas and marine industry value chain, revenues fluctuate with the overall sector trend, especially oil prices. The expansion or contraction in CapEx from the offshore oil and gas customers will decide the upturn or downturn of Mooreast’s businesses.
Mooreast performed well in the first year of COVID-19 as its Mooring segment (main revenue driver) secured two fabrication projects in the UK. However, the offshore oil and gas market was stagnant during 6M21, even though oil prices had been trending upward. Accordingly, the Mooring segment saw a significant slowdown in securing new contracts. Revenue from Mooring dropped by 55.5% YoY to S$4mn during the period.
Profitability is also impacted by inflation. To be more specific, raw material prices and labour costs are the primary sources of expenditure. Based on the past three-year average, Mooeast’s GPM and NPM is around 40% and 20% respectively. It is noteworthy that Mooreast had 54.3% GPM in Mooring segment due to the rental of mooring equipment which provides higher margins, compared to the sale of equipment.
Market outlook
Over the past five years, ESG (environment, social, and governance) investment had been one of the main themes, especially in Europe and US. Investment in the oil and gas sector has been gradually unfavourable due to policy and regulation pressures.
As shown below, the global oil majors have continued reducing exploration and production CAPEX over the past few years. Capital flocked to green projects such as solar, wind, and electric vehicle. In fact, this led to a new issue: insufficient oil supply as related capacity fell.
With increasing vaccination and gradual reopening of borders, the normalisation of worldwide and domestic travelling and production activities will be realised gradually in 2022 and 2023. The consistent growing demand for oil is expected to outpace supply. As a result, higher oil prices will incentivise some capital to flow back to E&P areas. Therefore, the upstream offshore oil & gas and marine sector could embrace tailwinds in 2022 and 2023.
Company outlook
In the near term, Mooreast’s mooring business could bottom out from the soft market sentiment as the upstream oil and gas E&P CapEx will rebound next year. In the mid-term, Mooreast’s renewable energy could increase the shares in terms of the revenue mix as Asia has more potential deployment of offshore wind farms.
