MTQ CORPORATION, which has paid interim and final dividends for more than 10 consecutive years, has decided to scrap its 1HFY2016 dividend (year end 31 March).
Given the low activity level in the oilfield industry, its rich historical dividend yield exceeding 7% will be missed by shareholders.
“We decided to be prudent and conserve cash in a tough operating environment,” said Group CEO Kuah Boon Wee during a teleconference with analysts on Friday.
The Group narrowed 2QFY2016 net loss attributable to shareholders to S$501,000 (1QFY2016: S$2.3 million). 2QFY2016 revenue was S$57.8 million, down 3.7% quarter-on-quarter while gross profit margin remained flat at 26.0%. The Group’s balance sheet remained strong with cash and cash equivalents of S$38.8 million and a net gearing of 12.2%.
“We managed to reduce staff cost by retrenching staff outside Singapore. We also did not renew contracted staff nor replace resignations,” said the Group CEO.
For details of its financial results click here. Below is a summary of questions raised by analysts who participated in the teleconference, and the replies provided by Mr Kuah and CFO Dominic Siu.
Kuah Boon Wee: The qoq improvement was slight. Losses were higher yoy. Binder is focusing on power and LNG, sectors that need more government investment in light infrastructure. We see opportunities for Binder. For example, we have secured work for the next phase of Singapore LNG, as well as work from Petronas.
Margins are relatively low in a manufacturing business [like Binder's] compared to a services provider, and everyone [in the industry] is facing margin pressure.
Q: What was booked under the “Other Income” item?
Kuah Boon Wee: We had an insurance claim of S$1,766,000 for ROV assets. There was a corresponding asset write-off of over S$6 million booked under “Other operating expenses”.
Q: Why are you not paying an interim dividend when your net gearing is less than 13%?
Kuah Boon Wee: In the past few years, our cash position strengthened while we reduced our borrowings. So, we were able to pay more dividends.
Dominic Siu: In the current volatile environment, cash is king.
Kuah Boon Wee: We just want to be prudent and maintain healthy cash reserves.
Kuah Boon Wee: We took at small interest in a diving support vessel deployed for Apache a couple of years back when the end-user was very concerned about lack of availability of offshore vessels.
We have entered into an agreement to sell the vessel. It is primarily about recovering our asset and moving on. We will realize cash for fixed assets and the gain is likely to be reflected in the next quarter's results.
Kuah Boon Wee: This wasn’t just an asset sharing deal. It was a joint venture in a business with a 5-year plan. We have already depreciated part of the related asset value.