Report: Tanjung Offshore to post losses in Q1

MIMB Investment Bank Bhd expects Tanjung Offshore Bhd to post losses in the first quarter of 2011, estimating it at RM3.5mil.
“The expected lackluster first-quarter 2011 result, which will be announced this month end, is expected to dampen sentiment further,” it said in a research note on Friday.
MIMB Investment said a key re-rating for Tanjung Offshore would be the turnaround of Citech Energy Recovery Systems UK Ltd (Citech), which is unlikely in near-term.
It said Citech remains an earning dampener to the group given its slower-than-expected contract flows which cannot match its high operating costs.
It has US$15mil worth of contracts in hand currently that will last for a year.
These contracts fetch low margins that hardly cover its recurring operating costs of £250,000 a month, MIMB Investment said.
“This unit is expected to contribute RM2.5mil in losses to the group in the first quarter of this year. Since the takeover in August 2008, Tanjung Offshore had already incurred around RM60mil losses from this venture,” it added.
Given the poor earnings results in the past quarters, Tanjung Offshore plans to refinance about RM240mil bonds to ease cashflow. It needs to repay around RM25mil a year for these series of bonds till 2016.
After the restructuring, the debt repayment is around RM20mil a year and stretches till 2018.
It trimmed Tanjung Offshore’s financial year 2011 earnings by 79% after incorporating the lower profit margins for Citech, amortised RM9mil dry-docking costs over five years and amortised RM8mil penalty for early-debt redemption over eight years.
“We expect no dividend per share in financial year 2011 from a two sen assumption previously. Also, we have launched new estimates, for financial year 2012 and 2013.
“This was based on all vessels being chartered out and a breakeven for Citech.
“However, we still assume no dividend per share within these two years,” it added.

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