Beng Kuang Marine's Strong Half-Year Results and Runway Ahead

I've been extremely busy with work over the last few months. As a result, I didn't realize it had been over 3 months since my last written update on this blog. 

Despite that, I decided it was time for a follow up on a company I've been watching closely - Beng Kuang Marine ("BKM"). 

A lot has happened with their share price since my last write-up. It peaked at over $0.30 after being at $0.168 previously. Now it has pulled back to around $0.210.

Beng Kuang Marine Share Price / Source: InvestingNote

I distinctly recall the first time I covered BKM back when their share price was just $0.061! They've undoubtedly come a long way since. Most recently on 5 Aug 24, BKM announced their half-year financial results.

Beng Kuang Marine Income Statement

While the results were impressive, the profit margins alone do not fully capture the significance. Even removing the $5.5 million one-time gain from disposing of the Batam shipyard, BKM remained profitable. This highlights the true transformation - BKM has turned the corner from recurrent losses to sustained profitability, just as I had predicted previously. 

Beng Kuang Marine Balance Sheet

An examination of BKM's balance sheet reveals substantial improvements. The company achieved considerable working capital growth, with its cash position swelling by over $7 million even as borrowings declined by $5 million. With a higher cash balance and lower debt load, BKM's financial position has been strengthened considerably. 

As investors, our focus is on the future - what catalysts can propel BKM's turnaround further?

In my opinion, there are 4 catalysts.

Firstly, the bonus warrants offer potential cash injection. By allowing shareholders to purchase additional shares at $0.22 in the future (if share price remains above $0.22), up to $13 million could be raised if fully exercised. This aligns with BKM 2.0 ambitions to explore new business lines and partnerships through strategic investments.

Beng Kuang Marine Presentation

Secondly, the Corrosion Prevention unit is a steady income generator. As the residential contractor of various shipyards, it will remain a core earnings pillar. With projections of $173 billion in FPSO orders over the next five years potentially resulting in 168 new units, demand for corrosion prevention will only grow over the years.

Thirdly, the Infrastructure Engineering segment is also poised for growth. While BKM doesn't partake in newbuild orders, the projected rise in FPSO volumes will spur requirements for maintenance where this business specializes in the years to come.

Lastly, in the next full year reporting, I believe a dividend might be in the works.

In summary, with ample cash, a reliable services backbone, and opportunities across supplying the expanding offshore sector, BKM appears well-placed to continue transforming. Subject to execution, I believe that the company's turnaround trajectory remains on an upward path.

Follow me on X for the latest update.

Stay Tuned.