TECHNICS OIL & GAS recently announced that it has established a S$200-million multi-currency medium term note programme.
This is aimed at, among others, supporting its new move into building and owning assets for lease to its oil-and-gas clients, according to the management in an interview with NextInsight.
The leasing market has been growing and Technics had announced in May that it had been awarded its first leasing contract worth S$3.6m for two gas compressor engine-driven packages by a Malaysian client.
Clients are looking to lease certain equipment, instead of owning it, because oil fields now tend to be smaller and operations last 5-8 years, unlike major oil fields which operate for 20 or so years in the past.
The typical lease is for 2 years with an optional 1-year extension.
It's a change in market trend, and Technics is evolving with it.
Technics is a leading full service integrator of compression systems and process modules for the offshore oil and gas sector.
While gas compressor systems are expected to be the key assets for its leasing model, Technics has the capability to build a range of other equipment, including that for subsea work.
The leasing model is not without drawbacks, chief of which is that it ties up Technics' capital for long periods of time. The profit margins, however, are said to be good.
Aside from the recurring revenue from leasing, Technics is seeking to train its men to operate and maintain the assets for the clients. This value-add will boost profit margins.
In the meantime, Technics has undergone a weak 1HFY2013 (ended March 2013) with revenue down 77% to S$19.4 million and net profit down 92% to S$854,0000.
As a result, OSK-DMG analyst Lee Yue Jer has warned that Technics is not expected to propose a dividend for the current financial year.
In FY2012, it paid 8 cents a share in dividend (comprising 5 cents ordinary dividend and 3 cents special dividend).
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