Hi Albert, they are never deleted, but in some cases can be finished early when the workload was over-estimated. This is kind of common in new/large projects which are hard to estimate. But it's not typically a big effect
For (1), according to the CEO this would impact 2-3 mSGD in fuel costs and the rest would be mitigated or manageable if oil costs remain this high. When pushed on this, he said they are also improving ways of working and keep finding ways to increase efficiency mainly by doing some things in-house today vs subcontracting it. He saw more upside in those initiatives, than downside in inflation. They have long term contracts on key commodities. I think some subcontractors like Huationg would increase prices though and companies like OKP would have to share in the pain. So far they have not done it but it looks inevitable. Overall impact on OKP would be limited, and impact on Huationg would be larger, just because of their existing margins giving some robustness in results (or lack thereof).
(2) There are 5-10 companies like Kwan Yong which cannot be accessed at all by most international investors. For this reason, I think investors should buy them not with the expectation of the stocks re-rating to a fair multiple, but rather with the expectation of benefitting from the dividend streams. As the dividend is fairly small, they become less interesting in my opinion. Because you can't eat unused cash on the balance sheet. These companies are useful to watch, as a listing in Singapore or a special dividend could be a great catalyst. I should add that I'm not too smart on these companies because they are unavailable to me and they are too illiquid for me to create a meaningful position. These are also companies that don't want to talk. Not to investors and not to analysts/banks. If the stock goes down 50% tomorrow, it seems nobody really cares. No one to act on it and no banks or family office to take a position because the company doesn't want to talk. Anyway that's my 2 cents on it.
Can contracts be deleted?
Hi Albert, they are never deleted, but in some cases can be finished early when the workload was over-estimated. This is kind of common in new/large projects which are hard to estimate. But it's not typically a big effect
Great interview, thank you! I have two questions:
1. What happens if instead of higher diesel prices we get prolonged diesel shortages, if Hormuz stays closed for longer?
2. How do you see these SG-listed companies you mention compared to HK-listed Kwan Yong Holdings?
Thanks a lot!! :)
For (1), according to the CEO this would impact 2-3 mSGD in fuel costs and the rest would be mitigated or manageable if oil costs remain this high. When pushed on this, he said they are also improving ways of working and keep finding ways to increase efficiency mainly by doing some things in-house today vs subcontracting it. He saw more upside in those initiatives, than downside in inflation. They have long term contracts on key commodities. I think some subcontractors like Huationg would increase prices though and companies like OKP would have to share in the pain. So far they have not done it but it looks inevitable. Overall impact on OKP would be limited, and impact on Huationg would be larger, just because of their existing margins giving some robustness in results (or lack thereof).
(2) There are 5-10 companies like Kwan Yong which cannot be accessed at all by most international investors. For this reason, I think investors should buy them not with the expectation of the stocks re-rating to a fair multiple, but rather with the expectation of benefitting from the dividend streams. As the dividend is fairly small, they become less interesting in my opinion. Because you can't eat unused cash on the balance sheet. These companies are useful to watch, as a listing in Singapore or a special dividend could be a great catalyst. I should add that I'm not too smart on these companies because they are unavailable to me and they are too illiquid for me to create a meaningful position. These are also companies that don't want to talk. Not to investors and not to analysts/banks. If the stock goes down 50% tomorrow, it seems nobody really cares. No one to act on it and no banks or family office to take a position because the company doesn't want to talk. Anyway that's my 2 cents on it.