Presentation Slides (1469 KB) - Otto Marine Limited

DisclaimerOTTO MARINE LIMITEDThis presentation and the associated slides contain confidential information about Otto Marine Limited (the “Company”) and its subsidiariesand associates (together with the Company, the “Group”).Click to edit Master OTTO MARINE text stylesLIMITEDSecond Building level upon strong fundamentalsThird levelFourth levelFifth levellBy accepting such information, the recipient agrees to keep permanently confidential all information contained herein and that it will use suchinformation only for the purpose it has disclosed to the Company for participating in this presentation and not for other purposes and will notdivulge any such information to any other party without the express consent of the Company. Any reproduction of such information, in wholeor in part, is prohibited without the permission of the Company.This presentation includes only summary information and does not purport to be comprehensive. The information contained in thispresentation has not been subject to independent verification. No promise, guarantee, representation, warranty or undertaking, express orimplied, is made as to, and no reliance should be placed on, the fairness, accuracy, reliability, completeness or correctness of the informationor opinions contained herein. Neither the Company, any other company within the Group or its advisors, nor any of their directors, officers oremployees or any representatives of such persons, shall have any responsibility or liability whatsoever (in negligence or otherwise) for anyloss arising from any use of the information or any other information or material discussed.This presentation contains forward-looking statements relating to the business, financial performance and results of the Company. Thesestatements are based on current beliefs, expectations or assumptions and are subject to unknown risks and uncertainties that could causeactual results, performance or events to differ materially from those described in such statements. These risks, uncertainties and other factorsinclude, but are not limited to, economic conditions globally, the impact of competition, political and economic developments in countries inwhich the Group operates and regulatory developments in those countries and internationally, foreign exchange rates, oil and gas prices andthe completion of ongoing transactions. Many of these factors are beyond the Company's ability to control or predict. Although the Companybelieves that its expectations and the information in this presentation were based upon reasonable assumptions at the time when they weremade, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this presentation.Nothing in this presentation constitutes and shall not in any circumstances be construed as an invitation or an offer to purchase or thesolicitation of an offer to purchase any securities issued by the Company or any advice or recommendation with respect to such securitiesand no part of this presentation shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.2AgendaOTTO MARINE LIMITED• Overview of Otto Marine• Investment Merits• Business SegmentsClick to edit Master text styles1. Overview of Otto Second MarinelevelThird levelFourth levelFifth levell• Financial Highlights• Industry Outlook, Growth Strategies34

OverviewOTTO MARINE LIMITEDShare StatisticsOTTO MARINE LIMITED• Offshore Marine Group – engaged in Shipbuilding / Repair & Conversion, Chartering /Leasing and Specialised Services• Headquartered in Singapore – commercial, procurement, and treasury support to ouroverseas operations (Indonesia, China, UAE, etc)• Shipyard in Batam Indonesia – strong management and engineering team capable ofdelivering complex and deep water offshore vessels• Strategic direction – provider of specialised offshore vessels and services in nichetechnical segments (i.e. seismic, subsea, offshore construction, etc)• Customers – primarily specialised offshore service providers in niche segments, andfleet operators in the oil and gas industryShare price (Closing on 8 Nov 2011)Market capitalizationS$0.135S$255.2 2 million52 week high / low S$0.37 / S$0.129P/B 0.62Net Gearing 1.66Number of shares 1,890,429,000Major shareholders Yaw Chee Siew (63.64%)Lee Kok Wah (5.28%)Standard Chartered(4.30%)56OTTO MARINE LIMITEDInvestment MeritsOTTO MARINE LIMITED2. Investment Merits• Shipbuilding net order book of S$81.3m/US$62.5m (at 30 September 2011)– delivered 40 OSVs in the last 5 years• Chartering revenue to provide steady cash flow– OSVs chartered on medium to long term basis• Specialised services– service and vessel provider in strategic niche segments which command highermargin (i.e. seismic, subsea vessels for well intervention, ROV, IMR, etc), seismicbacklog contracts worth US$40.1m as at 30 September 2011• Customer base– ABCmaritime, Esnaad, Falcon Energy Group Limited, Mosvold Supply, MarineSubsea AS, Norshore Shipping, Robert Knutzen Shipholdings• Strong engineering and experienced management team– average of more than 30 years experience in offshore vessels building*(US$1.00 = S$1.3015)8

Investment MeritsOTTO MARINE LIMITEDInvestment MeritsOTTO MARINE LIMITEDCustomer base includes:9Front L to R: Reggie Thein (Director), Lee Kok Wah (President & Group CEO), Yaw Chee Siew (Executive Chairman) andHeng Hock Cheng @ Heng Heyok Chiang (Director)Back L to R: William Alastair Morrison (Director), Craig Foster Pickett (Director) and Ng Chee Keong (Director)10OTTO MARINE LIMITEDBusiness SegmentsOTTO MARINE LIMITED3. Business SegmentsShipbuilding / ShipRepair andConversion• Construction of complex, highspec& environment friendlyOSVs (e.g. AHTS, PSV,offshore construction vessel)• Repair / conversion of widerange of vessels (e.g. OSVs,ocean-going tug)• Sophisticated vessels for NorthSea operations that meet theABS or DNV class• Owns 64 ha shipyard in Batam• Selective outsourcing toChina shipyards• Build-to-orderShip Chartering• Two-pronged approach –Strategic Partnerships and100% owned fleet• Mainly deployed by customersin Singapore, Indonesia,Australia, West Africa andother South East Asiacountries• Vessels are on medium to longterm time and bareboatchartersSpecialisedServices• Service and vessel provider instrategic niche segmentswhich command higher marginsuch as seismic and subseavessels• Seismic operator– Reflect Geophysical*Orient Explorer*Reflect Aries*Pacific Titan• Subsea vessel provider, withROV capabilities– Surf Subsea Inc* Surf Challenger12

OTTO MARINE LIMITEDFocus on high specifications andhigher value vesselsOTTO MARINE LIMITEDTarget European/ North Seamarket thatrequire ABS orDNV classvesselsGlobal customerbase:- Norshore AS- ABCMaritime- Mosvold SupplyASShip designsfrom renownedNorwegiandesign houses- Marin TeknikkAS- Vik-SandvikSelectiveoutsourcing- Allows focus onsophisticatedvessels in Batamshipyard131314Strategically Located ShipyardOTTO MARINE LIMITEDShipbuilding: Complex OffshoreSupport VesselOTTO MARINE LIMITEDSingaporeSmall to medium AHTS(< 14,000 bhp)Large AHTS(> 14,000 bhp)Offshore construction vesselHeadquarters• Strategic advantage due to Singapore’s position asa regional marine and offshore industry hub−Access to marine and offshore support−−Access to expertiseClose proximity to SEA shipbuilding hub• Supply & anchor handling role• Supports Jack-Ups & standard depth Semisubmersibles• Drilling Unit for field supportand construction duties−Ready supply of qualified Indonesian workersBatam, IndonesiaOwn and operate PT. Batamec - 64 hectareshipyard in BatamWork barge with300 pax accommodationPlatform supply vesselOther vessels• Major South-East Asian shipbuilding hub− Access to large pool of workers in Indonesia− Only 1 hour away from Singapore by ferryWe are able to access marine expertise in Singapore and utilisea ready supply of workers in Indonesia15• To support accommodationrequirements• Transportation of cargo tooffshore oil rigs and platforms• Utility vessels• Work maintenance boats• OthersWe have a specialised focus on North Sea class offshore support vessels16

One of the largest yards inBatamOTTO MARINE LIMITEDThe Syncrolift® : IncreasingEfficiency of YardOTTO MARINE LIMITED• Land area of 64 hectares• Waterfront of 650 meters• 1 dry dock• 2 slipways (under construction)• SyncroliftWhat is itWhat itdoesTheAdvantage• Large lifting system, which raises andlowers vessels in and out of the water fordry-docking ashore• Allows construction and repair of up to 16*vessels at one time• Waterfront efficiency is multiplied• Much faster than using a drydock ortraditional vessel launch17*using 10,800 bhp vessels as a benchmark18Shipbuilding: StrongEngineering CapabilitiesOTTO MARINE LIMITEDCompetitive Market ShareOTTO MARINE LIMITEDRight mix of personnel and tools needed for sophisticated vessels• Led by highly qualified senior engineersIn-house design teamInvestments t in softwareDetailed engineeringi+ =• 3D design software,• Precise virtual model• Team of naval architectsTRIBON®and engineersKey benefits Minimises errors resulting in a more efficient shipbuilding process Greater accuracy in shipbuilding Productivity and cost efficiencyBatamecShipyard -Ranked 8th inAsiaAHT/AHTSnewbuildsWe utilise our strong engineering capabilities to provideturnkey solutions for our customers19Source: quoted from DnB NOR initiation report dated 1 February 201020

Globally Recognised SophisticatedYardOTTO MARINE LIMITEDOTTO MARINE LIMITED•Efficient operational capabilities and technical expertise elevates Otto’sposition as a sophisticated shipbuilder.Source: http://www.standard-club.com/docs/MikeMeade.pdf212222Expansion of CharteringOperations (As at 30 September 2011)OTTO MARINE LIMITEDStrategic PartnershipsOTTO MARINE LIMITEDTwo forms of chartering100% Owned charter fleet (100% ownership)• 29 operational;4x 10k bhp AHTS, 4x 6k bhp AHTS, 1x 7k bhp AHTS, 1x 8k bhp AHTS, 2x 61mmaintenance, 1x 75m, 5x 40m AHTS, 1x 300men accommodation workbarge, 5tug, 5 barge• 5 joining in 2011/2012;3x 28k bhp AHTS, 1x 8k bhp AHTS, 1x 300men accommodation work bargeStrategic partnerships (up to 49% equity interest)• 6 operational;2x 300men accommodation work barges; 4x 5k bhp AHTSExpected own charter fleet(No. of vessels)10152530 3408 09 10 11E 12FExpected JV charter fleet(No. of vessels)1 6 7 6 7• 1 under construction;1x 75m 08 09 10 11E 12FWe expect to grow our chartering income rapidly, on the back ofthe growth in our charter fleet size23Otto sellsvessel to JVCompany atmarket price1Otto Marine49% 51%Strategic Partner3Otto books income fromassociates2 Strategic partnerJV Companymanages & operatesvessel100%VesselKey benefits Leverage on partner’s expertise and globalnetworks No direct competition with our shipbuildingcustomers Passive, consistent & recurring incomeOur partners1. ABCmaritime AG2. Hoe Leong Corporation3. Go Marine Australia4. Surf Subsea Inc.Our strategic partnerships are structured to be a “win-win” situation24

OTTO MARINE LIMITEDSpecialised ServicesOTTO MARINE LIMITED•Service and vessel provider in strategic niche segmentswhich h command higher h margin such as seismic i and subseavesselsI. Seismic operator – Reflect Geophysical (81.8% owned)* Orient Explorer* Reflect Aries* Pacific TitanII. Subsea operator -Surf Subsea Inc (19.2% owned)*Surf ChallengerOffshore Service that provides better margin and enhance our performanceInvestor Relations Contact : Kamal Samuel | Tel: 6438 2990 | Email: kamal@financialpr.com.sg 252526OTTO MARINE LIMITEDResults Summary: 9M2011OTTO MARINE LIMITEDRevenue 58% S$206.3m4. Financial HighlightsGross Profit / LossS$10.1m 1m LossOperational Expenses16%S$25.0mPATMIS$51.1m Loss28

Historical PerformanceOTTO MARINE LIMITEDSegmental Performance9M2011 vs. 9M2010OTTO MARINE LIMITED(SGD millions)RevenueS$’million 9M2011 9M2010 Change %Shipbuilding, ship repair and conversion(1) 110.8 416.3 (73.4)206.3Ship Chartering 21.1 11.4 85.4(SGD millions)PATMILeasing 17.6 15.6 12.6Geophysical (2) 45.0 43.3 4.0Subsea Services 11.8 - N.M.Total Revenue 206.3 486.6 (57.6)Gross Profit/ (Loss) (10.1) 96.8 N.M.Gross Profit/(Loss) Margin (%) (4.9) 19.9 -Profit/(Loss) Before Tax (56.5) 51.1 N.M.(51.1) 1)Net Profit/(Loss) (att. to Share Holders) (51.1) 1) 49.99 NM N.M.Net Profit/(Loss) Margin (%) (24.8) 10.3 -Earnings Loss Per Share (SGD cents) (2.71) 2.68 N.M.2930Segmental Performance3Q2011 vs. 3Q2010OTTO MARINE LIMITEDConsolidated Balance SheetOTTO MARINE LIMITEDS$’million 3Q2011 3Q2010 Change %Shipbuilding, ship repair and conversion 16.8 50.0 (66.3)Ship Chartering 8.8 4.0 117.9Leasing 5.7 6.8 (16.6)Geophysical 14.8 19.5 (23.8)Subsea Services 5.2 - N.M.Total Revenue 51.3 80.3 (36.1)Gross Profit/ (Loss) (0.7) 7.2 N.M.Gross Profit/(Loss) Margin (%) (1.4) 9.0 -Profit/(Loss) Before Tax (20.3) 8.6 N.M.Net Profit/(Loss) (att. to Share Holders) (19.8) 8.7 N.M.Net Profit/(Loss) Margin (%) (38.6) 10.8 -S$’million 30 Sep 2011 31 Dec 2010Current assets 859.5 857.8Non-current assets 721.2 679.5Total assets 15807 1,580.7 1,537.33Current liabilities 728.6 708.9Non-current liabilities 442.1 358.5Total liabilities 1,170.7 1,067.5Net Asset Value Per Share (SGD cents) 21.69 24.85Net Gearing Ratio # 1.66 1.0431Note: # Total borrowings less cash and bank balances over equity32

Consolidated CashflowStatementOTTO MARINE LIMITEDRevenue BreakdownOTTO MARINE LIMITEDS$’million 9M2011 9M2010Net cash used in operating activities (142.7) (180.4)Net cash used in investing activities (6.8) (110.8)Net cash from financing i activities i i 55.4 209.4Net decrease in cash and cash equivalent (94.1) (81.8)Cash and cash equivalent at beginning g ofperiod149.8 227.22Effects of exchange rate changes on thebalance of cash held in foreign currencies0.8 (15.6)Cash and cash equivalent at end of period 56.5 129.8Revenue (S$’mil)3334Gross Profit BreakdownOTTO MARINE LIMITEDRevenue and Gross Profit byBusiness SegmentsOTTO MARINE LIMITEDGross Profit & MarginShipbuilding, Ship Repair and Conversion(SGD millions)Revenue decreased 73.4% to S$110.8 millionwhile gross profit decreased fromS$69.3million to gross loss of S$22.5 million:•Due to less progress of work achieved with salescontract for which revenue is recognised based onthe % completion method•The loss was mainly due to the reversal of profitsrecognised for the terminated sale contracts for thetwo vesselss•The profit on the vessel sold in September 2011 hasnot been recognised as conditions precedent havenot been completely fulfilledGross Profit (S$’m)Gross Profit Margin3536

Revenue and Gross Profit byBusiness SegmentsOTTO MARINE LIMITEDRevenue and Gross Profit byBusiness SegmentsOTTO MARINE LIMITEDShip CharteringSpecialised Services(SGD millions)(SGD millions)Revenue surged 43% to S$38.7 million andgross profit improved from S$21.0 million toS$22.2 million in 9M2011:•Due to enlarged fleet sizeReflect Geophysical registered revenue ofS$45.0 million, up 4% but incurred a S$12.3million gross loss in 9M2011• Due to lower utilisation of seismic vesselsSubsea business contributed t S$11.8 million inrevenue and S$2.5 million in gross profit in9M20113738Net Profit & Profit MarginOTTO MARINE LIMITEDOTTO MARINE LIMITEDNet Profit (att.to shh.) and Net Profit Margin(SGD millions)9M2011 vs. 9M2010 Net Profit & Net Profit MarginNet Profit decreased from S$49.9 million in 9M2010 to anet loss of S$51.1 million in 9M2011 & Net Profit Margindecreased from 10.3% to (24.4)% due to:• Decrease in revenue in 9M2011 due to less progress workachieved with sales contract• Decreased profitability due to the reversal of profit recognised forthe terminated sales contract for two vessels• Reduction in gross profit from geophysical segment due to lowerutilisation of seismic vessels• Higher finance cost due to larger chartering fleet5 Industry Outlook5. Industry OutlookGrowth Strategies39

Industry OutlookOTTO MARINE LIMITEDIndustry OutlookOTTO MARINE LIMITED• Soaring oil prices will excite O&G spending which will increasedemand for OSV and PSV8% growth previously, nowexpected 12% - 15%CAPEX spending• Otto Marine will stand to benefit from the recovery in the industryas players move towards deeper waterCAPEX development (includes next to drillingactivities, also engineering, geosciences andsupport services)Deepwater CAPEX by regionGraph AGraph BGraph BSource: Graph A: DnB NOR initiation report dated 1 February 2010Graph B: http://www.dockwise4.com/annual2009/?id=1441Graph ASource: Graph A: http://www.dockwise4.com/annual2009/?id=14Graph B: http://www.epmag.com/Magazine/2010/5/item58177.phpPotential demandfor new builds!42Growth StrategiesOTTO MARINE LIMITEDTackling IssuesOTTO MARINE LIMITED• Focus on the demand for offshore vessels for deep water operations which isexpected to improve gradually as the oil majors have increased their spendingand looking more towards deep-water drilling projects• Ride on our strength as a premium builder to attract the top OSV operators• Accelerate growth of chartering business to compliment cyclical nature ofshipbuilding business:• Expand our presence in the oil and gas market in Australia through GoMarine.• Expand into the African market through Global Workboats.• Strengthenth our specialised services segment by leveraging on our network ofglobal players in the deep water and subsea activitiesImmediate Concern 1 – 2 cancelled vessels (Hull No. 7048 and Hull No. 7049)• Management is evaluating various options on hand to deal with the cancelledvessels• May either sell these vessels at market value or aim at amalgamating them in theGroup’s fleet to charter them out• These very sophisticated vessels are sister vessels to ‘Deep Sea 1’ that recentlyattained the coveted maritime class certification from DNV• Already a number of enquiries for these vessels• World market for this size AHTS has improved in the past months as evidenced bythe rise in the charter rates in the North Sea4344

Tackling IssuesOTTO MARINE LIMITEDOTTO MARINE LIMITEDImmediate Concern 2 – Streamline Reflect Geophysical’s Operations• Intensify marketing efforts to improve utilisation of the vessels• Target projects which are physically proximate to minimise mobilisation time so asto maximise full production revenue6. Thank YouQ & A• Change cost structure for vessels from fixed to variable• Seek synergy within the Group to manage the vessels as compared tooutsourcing45