Management Q&A
Dated 9 September 2004
Dear Investors,
Thank you very much for the your questions and the opportunity for us to respond. We hope you have a better understanding of our business through this online exchange.
Your questions will be reposted in blue italics followed by our replies in black.
Rgds,
The Management Team
ASL Marine Holdings Ltd
Harry Han, you wrote ;
It seems that despite the rise in turnover, margins have fallen sharply.
I would like to know if margins will improve or continue to remain under pressure in the coming quarters?
Dear Harry,
Margins for the various business segments will improve. However, whether overall margin will improve depends largely on the revenue mix. If there is a comparatively larger proportion of shipbuilding revenue for FY2005 as compared to FY2004, likelihood is that the overall margin will be lower for FY2005 when compared to FY2004.
Regards,
The Management Team
ASL Marine Holdings Ltd
Gerald Rajoo, you wrote :
I am interested to know more about the Tabang concession. Past answers from Mgt focus on the benefits to ASL in terms of chartering and shipbuilding. Please elaborate more on the Coal business itself as follows:
Dear Gerald Rajoo,
Thank you for your interest. Below are our replies in black.
1. What kind of net profit contribution can be expected from Pan Assets/ASL Energy and the time frame.
Kindly refer to MASNET announcement no. 76 made on 26 August 2004. For FY2005, as the coal mine is not expected to reach its optimum capacity and realize its full potential, the minimum operating cashflow guarantee will kick-in. This means the net operating cashflow to be generated by the “actual” mining and marketing activities is not likely to exceed the US$2.3 million guaranteed by Oriental Minerals Corporation.
As such, the net profit contribution from Pan Assets for FY2005 is expected to be the minimum guarantee cashflow (gross profit equivalent) less its overhead, which is not expected to be substantial. However, we need to bear in mind ASL Energy's shareholding interest in Pan Assets and pro-rate the profit accordingly.
2. What is the nature of the minimum assured cash inflow to Pan assets. Is this referring to sales offtake.
As explained above, the minimum operating cashflow is equivalent to a guaranteed gross profit. Accordingly, it is the net cashflow derived from deducting all expenses relating to the mining, transportation and marketing of coal from its revenue.
3. Is Pan assets inactive at the moment?Thank you
Pan Assets expects to ship its first shipment of coal in the later part of the first half of FY2005.
Rgds,
The Management Team
ASL Marine Holdings Ltd
Warren, you wrote :
Dear Mgt,
The following DJ new reports sums its well (see parts in bold) "0838 [Dow Jones] ASL Marine (A04) unlikely to get big boost from tepid FY04 results; net profit +9.4% on-year at $9.9 million despite 49.8% rise in revenue to $118.3 million; this as overall gross profit margin down to 12.3% from 17.7%. Still, company's continued upbeat outlook for marine industry should support stock, as will final dividend of 1.4 cents/share, unchanged from last year.(CAW)"
My Qs:
Dear Warren,
Thank you for your questions. Here's our replies.
1. why were the results so tepid? Such that margins contracted drastically?
Kindly refer to MASNET announcement no. 76 of 26 August 2004. Our overall gross profit margin had been affected by the change in revenue mix and certain one-off expenses that were incurred to secure longer term business. For FY2004, there was a higher proportion of shipbuilding and trading revenue which have lower gross profit margin compared to the other operations
2. Also does the disappointing performance above now limits the scope of future dividends?
We do not have a fixed dividend policy, however we have been paying dividend at 1.4 cents per share or approximately 30% of our net profit attributable to shareholders. Further, dividend payment is also dependent on other factors such as the Group's need for funds.
3. Much as your management has upbeat assessment of marine industry, how will it translate into bottomline gains for shareholders? Thanks for doing this Q&A session
Kindly refer to MASNET announcement no. 76 of 26 August 2004, we expect higher revenue and profit for FY2005.
Rgds,
The Management Team
ASL Marine Holdings Ltd
Warren, you wrote :
Dear Mgt,
Some follow-up comments and Qs:
Noticed that your turnover grew by tremendous 50%, with shipbuilding & shiprepair leading the charge. However, your GPs only rose a mere 3.7%, while NPAT grew 9.4%..?
Further discovered that other shipyards like Labroy, Jaya, Ezra etc all enjoyed BOOM conditions over the same period and they reported sterling results.
Dear Warren,
Q1. Where did ASL's startegy differ from the other players?
ASL Marine, Labroy, Jaya and Ezra are different businesses operating in different segment of the markets with different business activities. Comparing across companies may not be meaningful as their risk profile are different and as such, their operating performance would also differ. While we are not in a position to comment on our competitors, ASL Marine's strategy has always been to be steadfast and not encourage volatility in profitability. We believe in a longer term view of our vertically-integrated shipbuilding, shiprepair and shipchartering operations and tend to go for more generic vessels that are not only more flexible in deployment, but also generally enjoy higher utilization.
Q2. When will ASL get back on the growth track?
ASL Marine is already positioning itself for further growth. This is evident in the various ventures under ASL Energy and the further strengthening of the management team. In the immediate term, we may not be able to fully realize the potential of the “investment” we have recently made thus far.
Q3. What impact and how soon will the shift into coal mining/transport have on ASL's bottomline?
Kindly refer to MASNET announcement no 19 made on 26 May 2004, contribution from the mining and marketing of coal commenced in FY2004. The coal operations contributed approximately US$100,000 of profit although the Group was only able to benefit 25% of this profit (our effective shareholding interest in the coal concession currently). Going forward, we can expect the profit to approximate the minimum guaranteed operating cash inflow, or at least US$2.3 million for FY2005, subject to effective shareholding interest.
Rgds,
The Management Team
ASL Marine Holdings Ltd
Magne, you wrote ,
Coal mining logistics? Isn't that the same business as Sembawang Kimtrans? Management, can confirm if you are competing with Sembawang? Not a bad move coz Sembawwang doing very well there as shown in their latest results.
Dear Magne,
ASL Energy, a 50%-owned joint-control entity of ASL Marine, is involved in various parts of the coal logistics business. There is minimal direct competition as there is sufficient demand for such services.
Rgds,
The Management Team
ASL Marine Holdings Ltd
Dear Investors,
Thank you for all your questions and interest in ASL Marine Holdings Ltd. We have come to the end of this Q&A session and hope that you have a better insight of our company and our operations.
Rgds,
The Management Team
ASL Marine Holdings Ltd