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Otto Marine Limited Makes a Comeback

Otto Marine Limited (SGX: G4F) is an offshore marine group that specializes in the subsea and deep sea segments. It operates in three distinct business divisions: Shipbuilding, repair, fabrication and conversion; specialized services; and, ship chartering and leasing.

The company owns and operates one of the largest shipyards in Batam, Indonesia. Its customers are primarily major players in the oil and gas industry and fleet operators who provide logistics support to offshore service companies. Two of its competitors which also own shipyards in Batam include Marco Polo Marine Limited (SGX: 5LY) and ASL Marine Holdings Limited (SGX: A04).

Otto Marine had just released its full-year results for 2013 yesterday.

Some basic numbers

For the 12 months ended 2013, revenue soared 36.8% year-on-year from US$374.4 million to S$512 million, propelled by buoyant sales and delivery of vessels (from its shipbuilding activities) coupled with increased ship repairs and fabrication work. The revenue increase was partially mitigated by the decrease in sales from the other segments.

As a result of the boost in sales figures, gross profit also surged 450.1% on a year-on-year basis to US$46.5 million. In addition, other income jumped 307% from US$22.8 million to US$92.7 million mainly due to the gains from the deconsolidation of a subsidiary.

To top it off, the company’s “other expenses” were significantly reduced by 85% in 2013 to US$5 million. In 2012, Otto had seen impairment losses on its assets on a number of fronts that affected its available-for-sale investments, plants, properties, equipment, and goodwill, among others. These losses were a lot lower in 2013, leading to the lower “other expenses”.

All told, Otto rebounded from a US$113.7 million loss it suffered in 2012 to hit a profit of US$15.9 million for 2013. Nevertheless, its net profit margin stands at a meager 3.1%, way below the 12% margins it had achieved at its peak in 2008 and 2009.

Financial Statement

Otto Marine ended 2013 with an improved balance sheet compared to a year ago as borrowings fell from US$403 million to US$330 million and total equity increased from US$223 million to US$304 million. As a result, its net gearing ratio fell from 2.31 to 1.63 times, a drop of 29.43%.

On the cash flow side, Otto Marine’s operating cash flow for 2013 had increased significantly from US$62 million in 2012 to US$157 million. However, the growth in operating cash flow was largely offset by two factors: Otto Marine’s use of cash for investing activities had swelled from US$24 million a year ago to US$85 million; the out flow of cash from the company’s coffers due to financing activities (comprising mostly of loan repayments of various sorts) had gone up as well from US$61 million to US$71 million.

The net effect of all that manifested itself in the company’s cash hoard on its balance sheet barely increasing from US$47 million a year ago to S$48 million.

Valuation

At Otto Marine’s share price of S$0.087 on Friday, its shares are valued at an estimated 0.9 times book value and 12 times trailing earnings. The company’s Board of Directors is proposing an ordinary dividend of 0.1 cents per share for 2013 (there were no dividends for 2012)  which will result in a dividend yield of 1.15% at Otto Marine’s current price.

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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.