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Viking Offshore & Marine has taken its first steps to being an integrated M&E offshore player, writes CHEN HUIFEN
Growing the business: Chairman Andy Lim (left) with CEO Ong Choo Guan. Mr Lim says he wants to use Viking as a platform to consolidate all the smaller businesses
'The real value add is, if I'm able to integrate it with fire safety, explosion-proof, accommodation building, instrumentation (businesses), then we will be a very major player . . . because the industry is still very fragmented,' he said.
A HVAC (heating, ventilation, air-conditioning) and refrigeration solutions provider for the marine industry, Viking Offshore & Marine came about following the acquisition of Viking Airtech Pte Ltd by investment company Novena Holdings in January this year. Mr Lim, who took over a major shareholding of Novena Holdings last year, was looking for a core business to inject into the firm until he found Viking Airtech.
'It had no debt, $6-8 million of free cashflow, an order book of $35 million, good management, what else can I ask for?' he said. 'And the PE (price-earnings ratio) of five is reasonable. So we consummated the deal within eight weeks.'
Mr Lim explained that the hunt for a core business did not take long because he knew what he wanted. Having been an adviser to KS Energy previously, he saw that the HVAC&R segment was highly fragmented with plenty of SMEs.
'And I wanted to use Viking as a platform to consolidate all the smaller businesses,' said Mr Lim.
Novena Holdings spent $44 million - $20 million in cash and the rest in shares - to buy all of Viking Airtech. On its own, Viking Airtech is already a leading contractor for five major shipyards in Singapore, including those of Keppel Offshore & Marine, SembMarine, Drydocks World and Otto Marine. Having been around for over 15 years, the company has grown from a mere a distributor to having its own brand of HVAC&R systems.
For FY2009, Viking Airtech posted net profit after tax of $7.95 million, on a revenue of $37 million. Apart from an order book that runs into 2011, the company has also identified $100 million worth of projects to target over the next two years.
Following the completion of the acquisition, Novena Holdings was rebranded as Viking Offshore & Marine (VOM), a name more reflective of its core business. About 60 per cent of its core business comes from rig-builders, while the remaining is derived from ship owners.
In the ships market, revenue from the past few years largely came from the installation of HVAC&R solutions on new vessels, which account for about 80 per cent of the segment. But with the shipbuilding industry still in its doldrums, Viking Airtech has since turned its attention to refurbishing existing ships.
Noting that many old ships do not have a redundancy system in their HVAC installation, Mr Lim said Viking Airtech could replace them, so that when the main system breaks down, a back up would continue to serve the crew for the rest of the journey.
'These are all about hygiene factors,' explained Mr Lim. 'To attract crew to work on ships for 120-160 days, this is a basic expectation. Even the engine rooms nowadays are air conditioned.'
Apart from that, VOM is also eyeing Malaysia, Vietnam, India and Brazil as its new markets. The company already has experience in the Indonesia and China markets. In China, it has a representative office in Shanghai and operates a factory in Yantai that manufactures the Viking Airtech brand of equipment.
On plans to acquire new businesses in fire safety and explosion-proof HVAC services, instrumentation, and accommodation building, Mr Lim said they would be synergistic to VOM's core. Price negotiations are underway with several targets. And when the entire chain is complete, VOM will be able to offer what Mr Lim metaphorically refers to as 'yi tiao long' (one single dragon), or a chain of integrated services. This way, rig-builders, ship repairers or ship owners only have to deal with one provider.
'Typically, when you lay the air con (cables), you should lay the fire safety too,' said Mr Lim. 'But currently, because you have two different contractors, you do your part, I do my part. If the contractor is the same, then we can do it together. That's why I see the synergy.'
When the acquisition of those targets complete, Mr Lim reckoned that the amalgamated earnings would definitely qualify VOM for the mainboard.
Even before that, management is already beginning to reap the fruits of the acquisition. Major shareholder Mr Lim, who now owns 24.02 per cent of VOM, has since injected his knowledge on corporatisation, expertise drawn from his role as chairman of private equity investment firm Tembusu Partners. A key step was the recent appointment of former IBM Singapore CFO Low Jooi Kok as its CFO, a role it never had.
'We are beginning to see the benefits from the oversight by the corporate management, which provides strategic directions and sound financial advice,' said CEO Ong Choo Guan, previously executive director of Viking Airtech.
Even as it focuses on the offshore and marine sector, VOM intends to hold on to stakes in FMCG distributor Chuan Seng Leong Pte Ltd and beauty products retailer Shine@Spring Pte Ltd, as well as a variety of listed firms ranging from Asia Water Technology and United Envirotech to Tung Lok Restaurants, Old Chang Kee, and TT International. Shareholding in these listed firms, ranging from 2.95 per cent to 14.29 per cent, amount to a total value of about $30 million. Most of them were inherited from Novena Holdings.
'We have no intention to divest,' said Mr Lim. 'However, if someone gives us a price we cannot refuse, then we'll sell.'
JUST months after making its way to the Catalist board, Viking Offshore and Marine Ltd already has big plans to ascend to the mainboard over the next two years. According to its chairman Andy Lim, the entry to Catalist is merely a first step to building an integrated M&E offshore player.