Excerpts from analyst's report

UOB Kayhian analyst: Nicholas Leow

nicholasleow6.16A resilient marine logistics play, Sinwa’s management is stepping up on its investor relations effort to improve its share liquidity. L-R: UOB Kayhian analyst Nicholas Leow, Sinwa Executive Chairman Mike Sim, Sinwa CEO Bruce Rann. Photo by Colin Lum

One of the leading marine, offshore supply and logistics players servicing the marine and offshore industry, Sinwa is trading at 9x 2015 PE based on a recent share price of 24.5 cents.

It has the following investment highlights:

  • Diversified customer base with strong local market position
  • Healthy balance sheet and good dividend track record
  • Growth through expansion in new geographies
  • Opportunities
  • Future plans

One of the leading marine, offshore supply and logistics players servicing the marine and offshore industry

Sinwa’s main operations are in Singapore, with subsidiaries and offices in Australia, China, Malaysia and Thailand. From these offices in five countries, Sinwa is able to cover more than 100 ports in the region. The group is able to supply a wide range of heavy deck, spare parts, provisions and hardware to the marine and offshore industry. Sinwa services 40-45 vessels per day.

♦ Diversified customer base with strong local market position

Sinwa offers a wide range of products and services to an esteemed clientele which includes Maersk, BP, Seadrill and Sodexo. The local industry is fragmented with more than 200 different players. Sinwa is one of the dominant local players with an estimated market share of 15-18%. Our channel checks indicate that 65% of the Singapore market is dominated by five companies. Currently, oil and gas customers account for about 20% of Sinwa’s Singapore sales while 80% come from the shipping industry.

♦  Healthy balance sheet and good dividend track record

NicolasLeow"Sinwa is currently in net cash position with cash equivalents of S$27.6m, or 33% of its current market capitalisation. Over the past five years, Sinwa has been paying consistent dividends.

"The company paid special dividends for 2013-15 to return excess cash and one-off gains to shareholders. Borrowings have also been steadily falling from S$8.7m in 2013 to S$2.8m in 2015."

--- Nicholas Leow (photo)

♦ Growth through expansion in new geographies

With offices in five countries, Sinwa provides clients an existing network in more than 100 different ports in the Asia Pacific region.

Customers are able to streamline operations by tapping on Sinwa’s capabilities and efficiencies rather than relying on a long list of supply and logistics operators.

The company intends to cautiously expand its presence in overseas markets, in particular, Australia and Thailand. Furthermore, its existing prominent customers such as Sodexo and BP present the company opportunities to further expand geographically.

♦ Opportunities

Earlier this year, CMA CGM (CMA), a major client of Sinwa, announced the takeover of NOL and its intention to move its shipping traffic from Malaysia to a new terminal in Singapore. We view this move as a potential opportunity for Sinwa to expand its customer base by supplying to NOL vessels as well.

♦ Future plans

Sinwa is currently expanding its range of services and capabilities in Singapore with the addition of a new 54,000sf warehouse which is expected to be completed in 4Q16. The new warehouse will enable Sinwa to expand into serving the cruise ship and navy segments after obtaining relevant licences, such as the HACCP certification, and purchasing coolers and freezers. This will also allow larger bulk orders for Sinwa when purchasing inventory, which will translate into lower cost.