FY2014 WAS a milestone year for precision components contract manufacturer Giken Sakata. Its net profit was 4.7 times what it was a year earlier. It has also acquired a profitable onshore oil & gas drilling contractor.
The Group posted net profit attributable to shareholders of S$2.1 million for its FY ended 31 August 2014, compared to S$445,000 a year earlier wholly from precision engineering for components contract manufacturing.
“We expect to continue to do well in precision engineering,” said Group CEO Sydney Yeung at its results briefing on Friday.
Mr Yeung became Giken's Group CEO on 16 September this year.
He became its largest shareholder with a 16% stake upon the completion of its acquisition of Cepu Sakti Energy ("CSE").
The Group’s revenue fell by 45.6% year-on-year to S$69.0 million due to the discontinuation of a games machines project for a well-known player that decided to take the project in-house.
Photos by Sim Kih
This, however, helped lift gross margin by 9.5 percentage points to 17.0% as the discontinued project required relatively low value-add components.
“Our gross margins are very healthy compared to other components contract manufacturing players,” said the CEO.
Onshore oil & gas business to contribute immediately
On 10 September 2014, the Group completed the acquisition of a 53.7% stake in CSE, an oil and gas services business with operations in Indonesia.
The purchase consideration was settled by the issue of 80 million new Giken Sakata shares at 30 cents each.
CSE has access to more than 300 oil wells under its portfolio of operating licences in Indonesia.
It is producing 880 barrels of crude oil per day out of 15 oil wells located in two of CSE’s five oil fields (as of September 2014).
The newly acquired companyis expected to start contributing to the Group’s earnings from 1QFY2015.
Below is a summary of questions raised at the Group’s results briefing, and the replies provided by Mr Yeung, executive director / CFO Ng Say Tiong, Deputy CFO Valentin Schillo and CSE managing director Charles Madhavan.
Q: Why did you increase equity to repay debt in March when your gearing was low?
The debt was restructured 6 years ago with terms and conditions that would have made our investment in Cepu Sakti difficult. It was easier to just repay the debt.
Q: What is the utilization rate of your precision engineering facilities?
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