$CARIMIN / 5257 (CARIMIN PETROLEUM BERHAD) – Riding the O&G Upswing

Recently I read a report (well, it was about a month ago), issued by CGS which highlighted a trading idea on Carimin. Unlike other trading idea reports, this one delved a little bit deeper onto the business side of things, which was a pleasant surprise, and supported their bullish technical view with a fundamental view as well.

I think the report highlighted one very interesting, and important, point for CARIMIN as well as peers in the space, so let’s just go through some key points from the report.

1. Carimin is involved in the integrated maintenance and rejuvenation, Hook-up Commissioning or onshore/offshore O&G facilities via 3 segments: Manpower services segment ( providing skilled manpower to handle certain works), marine services segment (chartering of vessels), and the Construction, HUC, Topside major maintenance segment. They have been in operation for over 35 years and have completed over RM 3b worth of works so far.

2. It is worth noting that, unlike many of their O&G peers, Carimin is in a net cash position and does pay out some dividend although they do not have a formal policy.

3. Carimin relies a lot on capex spending by O&G asset owners for their business. Good news, is that the Petronas activity outlook has increased substantially compared to previous years, which implies that people like Carimin (as well as other mid stream players) should see healthy job rollouts. In fact, Carimin has already signed various contracts with Petronas in the recent months.

4. They had just completed their Kemaman yard not long ago which had been in development/talks since about 10 years ago, to cater to increasing demand for their EPCC works. Interestingly, they can handle EPCC for onshore pipelines works. They have another smaller yard in Labuan in the pipeline which will cater for East Malaysia works.

5. Carimin generally experiences seasonality in their reports, with the low season coinciding with the monsoon periods around q4 and q1 of a calendar year. This year, the low period was “masked” by various one off gains and reversals. So remember to take that into account.

6. CGS expects higher charter rates and utilization rates this year—with DCR as high as double up YoY. Last year, Carimin had a utilization of 66%.

7. Carimin had also recently acquired a new vessel which they will receive somewhere around this month, which is timely considering the high demand for vessel charters.

Their MS in 2023 recorded around RM 90mil of revenue (of which RM 35m was inter segment) and a pbt of about RM 20.5mil. This gives them a PBT margin of roughly 22%.

If what CGS said is true, we could be seeing MS overtaking the C,HUC,TMM segment in terms of revenue and profit, and leading carimin into having a record high year, excluding the addition of their new vessel. How much profit? Well, the numbers are there, and you can make your own calculations and assumptions. It looks like a very interesting preposition, at any rate, and carimin is rather undercovered in the market compared to larger, more well known peers.

This is just a quick few hour reading and digging around, and of course does not constitute any investment advice. However, I’m curious to know what you all might think on this @boncos @ryunanda @growthcapitalist @wsk20 @Lionelllleong