MTQ Corporation Limited Engineers S$6 Million in Net Profit

Regional engineering, maintenance and subsea services group, MTQ Corporation (SGX: M05), released its results for the third quarter of its Financial Year 2014 (3Q 2014) – a period encompassing the three months ended 31 Dec 2013 – after the markets closed on Monday. It reported a revenue rise of 106% year-on-year to S$75.1 million for the latest quarter. Net profit was at $6.4 million against a net loss of S$1 million in the previous year.

MTQ has two business segments – Oilfield Engineering Division and Engine Systems Division. The former division is involved in oilfield equipment repairs and rental operations to a wide range of customers in the oil and gas industry, including big boys such as ExxonMobil, ConocoPhillips and Halliburton. On the other hand, the Engine Systems Division is the largest aftermarket authorized service supplier of turbochargers and diesel fuel injection parts and services in Australia.

For the quarter, revenue more than doubled mainly due to contribution from Neptune Marine Services, which became MTQ’s subsidiary at the end of last year. The Oilfield Engineering division increased its organic growth across the locations it operates in, offset slightly by lower revenue from the Engine Systems division largely due to a weakened Australian Dollar.

Despite the increase in staff costs of 122% to S$11.1 million, net profit amounted to S$6.4 million for 3Q 2014. This is in comparison to a slight loss of S$1.0 million in the previous year due to the realised fair value loss of S$4.8 million that arose from the acquisition of Neptune.

For the nine months ended 31 Dec 2013, revenue surged 104% year-on-year to S$234.4 million while net profit went up 110% to S$18.4 million compared to a year ago. The growth that MTQ experienced in its top and bottom-line were mainly due to higher revenue from Neptune.

As of 31 Dec 2013, MTQ had total borrowings of S$63 million and a cash balance S$46.2 million. Its net gearing stood at 11.7%, an improvement of 9.6 percentage points from where the ratio was at on 31 March 2013.

The firm generated S$4 million in cash flow from operations in 3Q 2014, a decline of 70% over the previous year, mainly due to working capital changes.

Mr Kuah Boon Wee, Group Chief Executive Officer of MTQ, said, “The acquisition of Neptune has helped MTQ report a strong set of results in FY2014 thus far. Acquisition-related growth will taper off in the historical comparisons from next quarter. However, we remain very focused on improving results through cross selling, increasing efficiency, and streamlining our cost base further. Meanwhile, we are seeing healthy levels of activity overall and enquiries in Bahrain remain encouraging. Improving productivity remains critical to better results. I would also like to welcome the Binder Group into the MTQ family. In addition to strengthening our presence in Australia, its facility in Indonesia will help MTQ break into an exciting new market.”

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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 Sudhan P doesn’t own shares in any companies mentioned.