Sinwa CEO Bruce Rann in one of the three warehouses of Sinwa in Joo Koon Circle. Photo by Sim KihSINWA LIMITED's core business of being a marine supply and logistics company is riding on a growth momentum as its new client, Sodexo, has quickly become its No. 1 client.Sinwa's 1H2013 revenue grew 13.1% year-on-year to $70.6 million while net profit reached $4.9 million, up 158% from $1.9 million previously.
Sodexo, which is a global company with a diverse range of services, didn't figure in Sinwa's 1H2012 results.
The largest catering company in the world, Sodexo became a Sinwa client in June 2012.
Bruce Rann, who was appointed CEO of Sinwa in 2011, recalled: "I have a long-standing relationship with Sodexo in different parts of the world. When I came to Singapore, they were one of the first doors I knocked on.
"After some negotiations, Sodexo Singapore decided to go out to tender. We succeeded in gaining a two-year contract with options. Sodexo continues to grow in Asia-Pacific as does their requirements."
Under the contract, Sodexo would obtain F&B supplies as well as stores from Sinwa for the vessels and offshore oil and gas operations of Sodexo's customers.
Sinwa supplies deck stores, engine stores, electrical stores, safety equipment, general consumables and tools, and provisions and bonded stores.
Mr Rann illustrated the potential for Sinwa to grow with Sodexo by pointing to the fact that some 12 months ago, Sodexo was servicing 7-8 offshore oil & gas facilities in Thailand. That number has now grown to 21 and is expected to exceed 30 in the next 12-18 months.
"That's a huge amount of growth and a huge potential for Sinwa to be of service to them," he said. "We are in negotiations with a view to operating in Thailand."
Offshore oil & gas clients, who own oil rigs, or FPSOs (floating production, storage and offloading vessels for processing hydrocarbons and for storage of oil) and the like, are boosting the growth prospects of Sinwa, which traditionally has focused on servicing ships.
"For us to now pursue oil & gas in addition to blue-water shipping is a great bonus to the company," said Mr Rann. "Most of my expertise is in oil & gas, and that's the area we have been pursuing with some vigor."
In 1H2013, revenue from oil & gas customers largely originated from Sinwa in Australia. About 80% of its revenue came from the onshore oil & gas industry and the remainder from general shipping.
While the oil & gas business in Australia is resilient, "in the last few months, Sodexo has turned its focus on offshore oil & gas and we are hopeful of being part of that new business."
Sinwa's shares have performed well, owing partly to two special dividends totalling 3 cents a share declared this year in addition to a normal interim dividend of 0.5 cent.Chart: BloombergIn Singapore, oil & gas customers have had minimal contribution -- so far.
Sinwa is the largest operator in the marine supply, offshore and logistics industry in Singapore. Together with the other 4 foreign suppliers, the top 5 account for between 65-70% of the total business, with another 100 other suppliers accounting for the balance.
With its annual $100m plus revenues, Sinwa enjoys a clear competitive edge in economies of scale in global bulk purchases and operational efficiencies.
"Our clients know they can make a phone call asking "Can?" and when Sinwa says "Can!", they can put down the phone with the comfort of knowing it will happen."
The clients could call from their offices anywhere in the world at any time of the day. Their ships and oil rigs operate every day, so for Sinwa it's really a 24/7 service business.
Sinwa has its own warehouse facilities not only in Australia (3 locations) and Singapore but also China (8 locations).
It is contemplating starting operations in Thailand, at the request of its biggest clients, including Sodexo, said Mr Rann.
Another capex coming up is the rebuilding of a warehouse in Singapore, which would cost S$8-10 million.
Sinwa has the funds and future operating cashflows for all that. It had S$33.4 million on its balance sheet as at end-June this year.
Seeking to sell 2 vessels
Albert Chew, CFO of Sinwa. Photo by Sim KihSinwa has a loss-making vessel chartering business which it wishes to dispose of.
Said Mr Rann: "If any party came along with a decent offer, we would sell the remaining interests we have in the vessels. The good thing is, we don't have any debt on them, we don't have to contemplate a fire sale."
Early this year, Sinwa and its 50-50 joint venture partner sold a liftboat for S$52 million, with part of the proceeds channelled to paying two special dividends of 1.5 cents a share each, totalling about S$10 million. (An ordinary interim dividend of 0.5 cent a share was also declared).
A seismic survey vessel, which is the subject of a long-running legal action by Sinwa against its joint venture partner, has been only spasmodically chartered.
It is under negotiation to be chartered out on a bareboat basis next month, said Mr Rann, who would not elaborate on the legal tussle.
The third vessel, a AHT (anchor handling tug), is on a five-year bareboat charter in Australia, contributing $1.5 m in revenue last year. The charter ends in Sept next year.
Recent story: SINWA growing again; SWISSCO charters out boats
Comments
The sale of the first vessel, even at a loss, has resulted in Sinwa being in a net cash position; and the company has rewarded shareholders with two rounds of special dividnds.
One can expect more special dividends if the remaining two vessels are sold.
The first-ever ordinary interim dividend signals Sinwa's generosity in regular dividend payout