Sealink - Its Worst Is Over After Kitchen Sinking

Its net profit hit a peak in 2008 – at rm57.9 million before falling sharply with the onset of the global financial crisis. Earnings deteriorated over the next few years culminating in a net loss of rm10 million in 2012, weighted down by losses in shipbuilding arm. The net loss was attributed to a slew impairments and provisions. Its earnings finally recovered in 2013 though net profit of rm12.5 million remains well below the pre crisis high.

Going forward, Sealink is cautiously optimistic that the worst is over and that 2013’s recovery will continue to unfold and strengthen , underpinned by the chartering of offshore support vessels business for the oil and gas sector.

In fact, the chartering business had held up fairly well over the past few years prior to 2014 even as the shipbuilding arm floundered. The company currently (April 2014) operates a fleet of some 42 vessels that include anchor handling tugs/supply, landing craft, multi-purpose platform supply vessels, tug boats and barges.

Sealink has undertaken a fair number of kitchen sinking exercises in 2012 and 2013. This included nearly rm26 million in impairments of fixed assets, related to a ship building contract with BStead Penang Shipyard for two uncompleted vessels. As the company is upbeat that the clean slate will translate into better growth going forward.

The commissioning of two hybrid multipurpose platform supply vessels cum anchor handling tugs in the 2H2013 will underpin earnings in the current year.

It is planning to add two more similar vessels to its fleet by 2015 – 2016 as part of its fleet expansion and modernization programme.

The chartering business will be the key earnings driver going forward. The ship building arm is likely to continue to underperform for the foreseeable future.

It had two ship yards in Miri. But since the global financial crisis, utilization has fallen sharply and the activities are now consolidated in one location.

The company expects to break even in the current year and plans to start work on several vessels – for both in house and external sales – to be completed over 2015 – 2016 but the total value and contribution is not expected to be significant.

In the absence of additional provision, estimate its net profit to improve in 2014 and further in 2015 and 2016…

The company may resume dividend payments to shareholders should its outlook continue to improve.