SBI Offshore Limited (SGX: 5PL) surprised the market with a 26.3% gain since its close on last Friday to the current price of S$0.35 per share. The Straits Times Index (SGX: ^STI) lost 0.5% for the same period. Who is SBI Offshore Limited and what transpired to make the company a big winner in the Singapore’s share market this week?
SBI Offshore Limited is a service provider for the offshore and marine industry. It focuses on providing offshore engineering and equipment solutions such as steel fabrication, equipment manufacturing and distribution of specialised products.
SBI Offshore Limited experienced a 440% revenue boost in FY2013 due to a new Engineering, Procurement, Construction and Commissioning (EPCC) project in Asia. Due to the capital intensive nature of EPCC projects, investors have been concerned if SBI Offshore Limited would been able to find new capital to finance future projects. Last Friday, SBI Offshore put those concerns to rest.
SBI Offshore Limited announced last week that it will be issuing 62 million new shares as a private placement at S$0.2892 per share to raise S$16.151 million. The money will be used to fund existing projects and for developing new markets for the company. More importantly, the private placement is taken up by some of the region most well-known businessmen. Mr. Mirzan bin Mahathir is one of the cornerstone investors through his company, CE Ventures. Mr. Mizan is a prominent businessperson in Malaysia and director of Petron Corporation. The investment by Mr. Mirzan might help SBI Offshore in opening new markets in the region through his network.
However, there might be a possibility that the growth of the company has already been priced into the stock. Currently, the company is trading at a price to earnings ratio of 46.8 times with a dividend yield of only 0.57%. Unless the company can significantly increased its earnings in the future, investors might risk over paying for the high expectations of the company.
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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 Stanley Lim does not own any companies mentioned.