Investing in the Singapore Maritime and Off-Shore Industry

120px-The_port_of_Singapore Singapore is one of the busiest ports in the world, with the shipping and maritime industry playing a vital role to Singapore’s economy. Despite that, most retail investors are not familiar with the maritime and off-shore industry and sometimes might not even be understand how the sector works. As compared to the tangible shopping malls or retail sector listed on the stock exchange, gaining an understanding of the maritime industry can be a challenge.

First, let’s take a look at some of the players listed on the Singapore Exchange. At the top of the list we have the biggest players in the offshore industry – Keppel Corp (SGX: BN4) and Sembcorp Marine (SGX: S51). They provide a wide range of services across the entire value chain – from ship repair all the way to rig building and offshore production. In addition, both companies have decades of experience with proven track records. This has provided them to with the ability to clinch overseas projects, edging out other smaller players.

Next stop, we zoom in on the smaller offshore companies. Nam Cheong (SGX: N4E) is Malaysia’s largest offshore support vessel (OSV) builder and the group has over 20 years of track record in building OSVs, delivering over 80 vessels since 2007. It differentiates itself with a risky but successful business model – using Chinese yards to build vessels ahead of securing orders for them. This enables Nam Cheong to achieve high margins of 15 – 20% as compared to the Singapore peers of around 9%.

Furthermore, the company stands out with its close relationships with Malaysian OSV owners. As a result, its order book is expected to hit RM 1.4 billion for this year. With Malaysia’s Petronas setting aside a budget of RM300bn (US$100bn) in E&P spend over 2012-17, Nam Cheong will stand to benefit.

Another stock which has undergone a new management and a name change is Vard Holdings (sgx: MS7). Previously named as STX OSV, their parent company is now Fincantieri Oil & Gas, a wholly owned subsidiary of the Italian shipbuilding group Fincantieri. The stock crashed down over 12% after releasing a profit guidance statement that costs have outrun in its Brazil shipyard, leading to poor financial performance lower than the current consensus market estimates. Nevertheless, earnings can rebound when the teething problems are resolved and the company still has a strong order book of NOK 15.5 Billion (S$3.4 Billion).

Other offshore stocks include equipment solutions provider MTQ Corporation Limited (SGX: M05), life-boat operator Ezion Holdings (SGX: 5ME) and Indonesian OSV charterer – Marco Polo Marine (SGX: 5LY). Despite having recent order wins, the margins of the projects have come under pressure with increased competition over the globe.

With over 14 maritime and offshore stocks listed in Singapore, and retail investors are spoilt for choice when it comes to investing in the maritime and offshore industry here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.   Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.