Company Background
Established in 1976 by Mr Joseph Foo, Jason Marine (Jason) provided repair services for maritime electronic equipment. It moved on to represent major brands and distribute their marine equipment. From 2000 onwards, it took the next step to become a system integrator of communications and navigation systems for the marine offshore oil and gas vessels. The business has extended beyond Singapore, into Malaysia, Thailand, South Korea and China. It has been listed on the SGX since October 2009.
In terms of valuation, the stock trades at around 0.5x price to book. The 10-year historical average is 0.7x, with a high of 1.3x and low of 0.35x, on a monthly basis.
Revenue
Jason’s revenue is broken down into 3 segments:
Apart from communications, Jason sells navigation systems such as radar, compass and collision avoidance systems. It allows ships to move from one destination to another in the shortest and safest manner.
To sell these equipment, Jason has to secure the rights from the brand owners. Some of the principals that Jason represent are:
Securing 1 or 2 principals is not sufficient. As a system integrator, the customer’s request for quotes will contain many sub-packages or solutions. This will require Jason to represent a suite of brands to provide a complete solution.
The two industries which Jason services are:
Marine or shipping – Vessels under this category include tankers, bulk carriers, containers, workboats and fishing vessels. Because the size of the contracts are smaller, the yard will decide which SI to use. The shipowner can have some influence.
Offshore oil and gas – Vessels include oil platforms, semi-subs, FPSO and OSV. The contracts are large, the EPC company assigned to build the vessel will decide on the SI to deploy.
Between both categories, marine jobs are small while oil and gas contract can range between S$1mn to S$3mn.
2. Rendering of services: Relates to equipment leasing and maintenance and support services including repair works, troubleshooting, commissioning, radio survey and annual performance tests. Equipment leasing refers mainly to leasing of Electronic Chart Display and Information System (ECIDS – Figure 4). Such charts need to be updated periodically. Some customers may prefer to rent instead of a large upfront purchase for equipment. Maintenance and repair work are ad hoc in nature and not scheduled under long-term contracts.
3. Airtime revenue: Jason performs the role similar to mobile operators (more akin to MVNO) and sell airtime for satellite services. When out in the ocean, vessels need to communicate to shore or other vessels via satellite. Jason will work with Inmarsat, Intelsat, Iridium and other principals to provide such airtime services to customers. Pricing is on pay on usage or subscription basis. To compete effectively, Jason needs scale to secure the cheapest airtime cost.
Cost
Large cost components are equipment and labour. Margins depend on availability of contract and competition. Competition has been intense as the number of jobs in the marketplace has shrunk. Cost advantage from equipment only if purchase in bulk. System integrators only purchase equipment when there are projects that have been secured.
The closure of several major oil and gas operators over the past few years resulted in an increase in bad debt provision. Another major bad debt provision was the S$851,000 loan to associate – SIS, which is now under liquidation.
Another volatile cost item is foreign exchange. Significant amount of Jason’s revenue are billed in foreign currencies but reporting currency is Singapore dollar. This leads to occasional foreign exchange impact on net profit from the trade debtors and cash holdings. In FY19, there was a S$504,000 foreign exchange gain (in other income).
Cash-flow
A strength of Jason business model is the minimal capital expenditure required in the business. Over the past 10 years, total capital expenditure has only totalled S$4.6mn. Most of the cash is utilised in working capital and staff cost. Total FCF generated the past 10 years has been S$14mn.
Balance Sheet
Assets: Of the S$36mn total assets, almost 40% is cash (S$14mn), 33% is trade and other receivables, 13% is inventories and 11% or S$3.9mn is financial assets. Large part of trade receivables are contract assets, where work has been completed, recognised as revenue but not billed. Actual receivables turnover within 70 days.
Liabilities: Jason total liabilities stand at S$9.5mn, almost all are trade and other payables.
Competitors
Some of Jason competitors include Omega integration, CSE transtel, Radio Holland and Semco Maritime.
Customers
Jason major customers include Keppel Offshore and Marine, Sembcorp Marine, Cosco Corp and Modec.
Investment Highlights
Valuations
In terms of valuation, the stock trades at around 0.5x price to book. The 10-year historical average is 0.7x, with a high of 1.3x and low of 0.35x, on a monthly basis (Figure 6).
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