Management Online Q&A with Investors (24th August 2005)
Good afternoon to all investors,
Thank you for your questions posted over the past week. We are delighted to communicate with you on a virtual platform. Investors who wish to read up a bit more about us may find our IR website at http://www.listedcompany.com/ir/advanced a useful resource centre with our latest news, analysts reports, etc. For more information about our products and services, our corporate website is found at http://www.AdvancedHoldings.com
Your feedback is important to us, we are contactable at advanced@listedcompany.com
Best rgds,
Dr Wong Kar King
Managing Director
Your questions will be reposted in Blue followed by our replies in Black.
| Dear Clarence Chan Kwok Thong, you wrote: 1) Why is there Euro currency exposure? Are you putting in place some strategy to hedge against such currency loss? The company has contracts in both EUR and USD and has kept a basket of currencies to meet the requirements. We will continue to maintain foreign deposits for our funding needs. We forecast our inflows and outflows in foreign currencies required for operation needs to ensure that the mismatch of the payments and receipts is minimized. However we will continue to monitor and will consider hedging any material foreign exchange transactions should the need arise. 2) Your cashflow statement shows a depletion of working capital, due to large part of your income are work in progress and receivables in future. It is further exacerbated by the dividend payout, based on contracts secured but money not earned yet. Is this cause for concern? How will you address it in future? The contracts we secured are mainly payment by letter of credits. Our company has not encountered any bad debts for the past 3 years as we have monitored very closely on debts collections from customers. Currently the group maintains sufficient cash and the Company is of the view that the group will be able to sustain its funding needs. The company will continue to monitor closely on our cashflow to ensure that we have sufficient cash to meet our working capital requirement |
Dear Abbygoh, you wrote: Some quick qns. - Understand the company is going through a period of massive growth, gunning for bigger projects .... and bigger margins as well? This will likely require more working capital? Pls elaborate. Also understand from the announcements that the company is constantly on the look out for M&A possibilities. Any updates on that? Yes we are continuously pursuing bigger projects with better margins. Bigger projects will require more bank financing and facilities as well as working capitals. We are currently managing our funds and capital requirement fairly well. The company is constantly looking out for business possibilities through effective partnerships, JVs etc and will also not rule out any M&As provided it makes commercial sense. - At the moment, your order book looks impressive. For those contracts that you have signed in July as indicated in your HY announcement, if its not too sensitive, may I ask if the margins for these projects better than the earlier completed projects? Our margins are fairly consistent and therefore it is reasonable to assume the margins will remain stable, if not better. Unfortunately for competitive reasons, we would not like to comment further on our margins. - Seems like your process equipments can also be used for the Iron & Steel sector. Is it essentially the same time of products you produce for the oil/gas & petrolchemical sectors? How much contribution in % to your total revenue do you anticpate coming from the iron/steel customers in the forthcoming year/s? The process equipments are similar. However our focus are still the “oil & gas” and “petrochemical & chemical” and therefore we do not anticipate the contribution from iron & steel to make too much impact, i.e. probably no more than 10~15% , if at all. |
Dear Yellowcard, you wrote: Question : 1. Bulk of your earnings is still coming largely from China. Noticed that you have a Korean office as well. Are you worried with this single country risk? Can you share with us how much of your contributions is coming from outside China in the coming year/s? The setting up of our Korea office and the subsequent conversion to a full branch office so that it is authorized to sign contracts is an indication we are developing markets outside PR China. As what has been announced, we have already booked in over S$8millions from our Korea office for Texaco Oil in a Nigerian oil field. We will like to see in the next 5 years a more balanced contribution i.e. may be up to half from outside PR China. 2. Noted that you have supplied a process equipment to fit a FPSO facility in Nigeria owned by Chevron Texaco Corporation. That sounds like a big project. Will we likely see more of such bigger projects in future? Also will we likely see more projects coming from such clients as Daewoo / Chevron? We are pursuing actively with turnkey contractors and oil companies for similar projects. 3. Your orderbook is giving investors a good visibility over your potential revenue (and earnings). However, these are quite lumpy projects. Do you sign any maintenance contracts with these clients? If so, how many % recurring income are you getting as a total of your revenue now? And do you have any plans to beef out the recurring portion of your annual revenue? If so, how? As part of our growth strategy, we are actively developing business which will give us recurring income. We have fairly good success and have signed several maintenance contracts in PR China and Singapore. However, at this moment the contribution from maintenance is still insignificant, i.e. less than 5%. We do anticipate this as one of our growth areas and will continue to grow this recurring income. Besides this maintenance contracts we are pursuing with some M&A prospects whereby some of their revenue are recurring and this will no doubt help in averaging out our own overall revenues. |
Dear Ortega V., you wrote: Just noticed that you have a US based fund as a shareholder. May I ask if they are passive shareholders or are they actively helping you with your business growth? ie. opening doors in the West? Tiedermman is an active investor. They have met and advised us regularly on growth plans and have brought our company to the attention of other financial institutions. |
Dear Paul, you wrote: Question : Revenues were flat, any reasons for that? and is the biz subjected to seasonal demand? The revenue for 1H2005 appeared flat due to some timing issue of some invoices. As announced, we have invoiced S$7.6 millions after 30th June 2005. We will expect to see a bigger increase in the second half of FY2005. The china govt has been focusing on conserving energy policies for biz operating in China, can your products and services address energy wastage issues? We have envisioned this energy and conservation issues several years ago and have acquired some additional products and process technology for this area where we anticipate big growth. |
Dear John, you wrote: 1. In your clarification to SGXNet on the 16th of Aug, you stated that the trade debtors have increased from $1.3 mil to $3 mil. What is your standard milestone upfront contract payments. Do you foresee the amount of debtors increasing with time? Depending on the contracts that we have secured, the upfront payments may range from 5% to 20%. With the increase in revenue, we would expect our trade debtor and creditor to increase corresponding too. 2. Do you see any slowdown in the opportunities for the oil and gas industry? We anticipate the activities in oil and gas to continue as emerging economies including China and India are craving for energy source and they will continue to increase their needs for oil and gas outputs. |
Dear Investors,
Thank you for all your questions and interest in Advanced Holdings Limited. 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.
Regards,
Dr Wong Kar King
Managing Director