EPIC expansion to propel growth

Monday May 12, 2008 The STAR
EPIC expansion to propel growth
By YEOW POOI LING

EASTERN Pacific Industrial Corp Bhd (EPIC) is generating a consistent earnings stream, and expansion plans are anticipated to propel growth further.
It is currently trading at an undemanding valuation with price-to-earnings of 9.1 times and dividend yield of 3.9% based on consensus estimates for fiscal year ending Dec 31, 2008 (FY08) and Friday’s closing price of RM2.01. The share price is trading at a 39.8% discount from its 52-week high of RM3.32.

Its fundamentals are intact, if not better, given the high crude oil prices, which are currently trading above US$100 a barrel.

OSK Investment Bhd, in a report, said it was expecting a 20% growth in bottom line for FY08.
Growth will be partly driven by anticipated higher utilisation rate at its liquid chemical berth (LCB).
The company also plans to carry out upgrading works to handle higher deadweight tonnage vessels and construct more warehouses this year.

Its Kemaman Supply Base (KSB), a major supply base for oil and gas operations in the east coast, would continue to generate recurring cashflows since most of the production sharing contracts were long term, OSK said.

Besides its current 70%-owned fabricator, Mushtari Engineering & Trading Sdn Bhd, EPIC was also eyeing to develop a fabrication yard on about 24.3ha, OSK noted. “To our knowledge, all fabrication yards in Malaysia are fully utilised to fabricate platforms and modules for shallow and deepwater oilfield developments. It should benefit EPIC, with another 65 new platforms to be constructed over the next five years,” it said. The new yard, could accommodate about 10,000 tonnes to 15,000 of capacity, possibly placing EPIC as the sixth largest fabricator in Malaysia in terms of yard size.The two-phase development, expected to cost RM150mil, will give EPIC a good chance of securing a Petronas fabrication licence when operations commence.

Due to its recurring income, the company is sitting on a net cash of RM74mil as at end December 2007, which is a healthy financial position compared to some oil and gas companies that are highly geared.

Perhaps the rosy future of EPIC is best known by Ahmad Zaki Resources Bhd (AZRB), which bought a 20.5% stake in EPIC at RM2.40 in July last year. Since then, AZRB has been accumulating EPIC’s shares gradually from the open market, with current shareholding standing at 20.99%.