As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Click to email CW8888 or Email ID : jacobng1@gmail.com



Welcome to Ministry of Wealth!

This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

Think Investing as Tug of War - Read more? Click and scroll down



Important Notice and Attention: If you are looking for such ideas; here is the wrong blog to visit.

Value Investing
Dividend/Income Investing
Technical Analysis and Charting
Stock Tips

Wednesday, 19 January 2011

Rotary chalks up one success after another

By RONNIE LIM


FORGING strategies from challenges - that's what engineering, procurement and construction (EPC) specialist Rotary Engineering is cleverly doing. When the Singapore market for oil terminal projects (its forte) dried up as land-challenged Jurong Island quickly filled up following the influx of higher-value-add petrochemical projects, it was forced to turn outwards. Thus, from local projects (like Hin Leong Trading's Universal Terminal) accounting for 80 per cent of its revenues just five years ago, today it's the reverse.

Overseas projects - like its billion-dollar Saudi Aramco Total (Satorp) oil terminal in Jubail, Saudi Arabia and another smaller terminal in Fujairah - now account for 60-70 per cent of Rotary's revenue, Chia Kim Piow, its chairman and MD, tells BT. And the group's longer-term target - say, in five years - is for an 80:20, foreign:local revenue split.

Currently in its sights this year are more Saudi projects, like an estimated US$750 million tankfarm for the US$7 billion Jizan refinery project, as well as break-bulk oil depots near Riyadh, worth about US$200-300 million each. Rotary is also bidding for an oil terminal project in Turkey involving Turkish petrochemicals producer Petkim and Dutch terminal operator Vopak at the port of Aliaga, which will reportedly be modelled along the lines of Jurong Island. And it also wants to venture into Africa, where it is eyeing a tankfarm project in Libya.

Still, despite the Middle East expected to account for 60 per cent of its projects, and Europe (including Turkey) for another 20 per cent, it is not ignoring home market Singapore. It is currently in discussions with a new wave of incoming specialty chemical producers - like the synthetic rubber producers and others at the new high-purity ethylene oxide 'corridor' on Jurong Island, Mr Chia reveals.

Construction of such chemical process plants will now form the third leg of Rotary's portfolio, adding to its other established areas like EPC for independent oil terminals, and EPC for tankfarms which are integrated with refineries/ petrochemical complexes, as well as offsite projects like utilities.

Mr Chia also argues that Europe (which is closing many of its older, inefficient refineries) is also not a mature market, as the continent's strong energy demand in fact translates to a need for new storage and distribution terminals to be built.

Backing up Rotary's ambitious global drive is its own 7,000-strong trained global workforce (including 1,000 from Singapore), half of whom are from India with the remainder mainly from China - countries where it has established training centres. Having such workers on hand is critical, Mr Chia stresses, lamenting, for instance, the loss of thousands of trained workers 'who just disappeared from Singapore' after the Shell petrochemical complex was completed recently. At its peak, some 6,000-8,000 workers were employed at the Shell site.

'We are also quite slow,' Mr Chia says, when asked about Rotary's recently announced plan to take stakes in oil terminals in Indonesia (Kalimantan and Surabaya are potential sites, he says), Malaysia and Vietnam, as well as in the Middle East. What he means by this, he explains, is that while property contractors here have gone on to become big property developers, the EPC players haven't as yet done so. Rotary's route to this is likely to be through the BOT (build-own-transfer) process, as operating a terminal is not its forte, he adds.

Again, this new strategy - to take stakes in its EPC projects - was born out of necessity. Ever since the global credit crunch, banks have been more tightfisted, and Rotary's equity participation of, say, a 15-20 per cent stake in such projects - or roughly equivalent to its typical gross margin of 18-20 per cent for EPC projects - 'will help reassure the bankers', the astute Mr Chia says. It is currently in discussions regarding equity stakes in several potential projects, but is not ready to disclose details just yet, he adds.

Under its plans to go global, Rotary Engineering, with a market cap of over $500 million, will hold an inaugural regional conference here this Friday with a keynote address by Finance Minister Tharman Shanmugaratnam. Some 200 participants including from government organisations and industry, comprising players like Shell, ExxonMobil, Oiltanking, Vopak, National Iran Oil Company, Concord Energy and Malaysian Industrial Development Authority, will be attending.

No comments:

Post a comment

Related Posts with Thumbnails