O&M Sector – The Sunken, Sinking & Floating March 21, 2017

O&M Sector

What a weekend it has been again for the O&M sector. Barely a month went by without news on the sector’s spiraling doom or potential recovery. This time round two companies from the sector come into focus.

Ezra – The Sunken

The signs have been there for a while but the last nail in the coffin came on Sunday when the Board of Ezra announced that they have commenced the filing for Chapter 11 protection under the US Bankruptcy Code.

Just a few points on what it means for Ezra if Chapter 11 is approved:

i) The company can continue to operate under the supervision of United States Bankruptcy Court while paying off its debt, meaning Ezra does not have to fold their business immediately and liquidate all assets to pay off creditors

ii) The automatic stay will halt actions by creditors, with certain exceptions, to collect debts from the debtor, this means that Ezra can continue their business relatively free from the harassment of creditors

iii) The freedom to restructure secured debts, meaning Ezra’s repayment can be lower and over a longer period of time

Common equities or common shares are considered the lowest priority in the event of a company’s liquidation.

O&M Sector – The Sunken, Sinking & Floating

*For detailed and complete information on Chapter 11 or debt hierarchy, please seek professional advice from the relevant authorities.

The shares of Ezra has been on trading halt since 15th March and has been suspended with immediate effect today.

Nam Cheong – The Sinking

After market closed on 17th March, Malaysian offshore shipbuilder Nam Cheong released an announcement on SGX that its independent auditors, BDO LLP have included an emphasis of matter with respect to the material uncertainty related to ongoing concern in their report on the financial statement of the Group for FY16.

The above paragraph simply means that the auditor is having doubt on Nam Cheong’s ability to continue its business in view of its unstable finances, poor earnings and upcoming repayments requirements.

For the financial year end 31st December 2016, Nam Cheong incurred a net loss of approximately RM 42.7m and has current loans amounting to RM 948.7m of which RM 278.6m are due for repayment in August 2017. The Group’s cash and cash equivalents of RM 162.6m as of end 2016 is likely to be insufficient to cover this.

Not surprisingly, Nam Cheong’s share price opened at 0.04 on 20th March and closed at 0.034, down 30%. The share price movement of Nam Cheong shows an eerie similarity with the movement of Ezra’s share price before it was suspended.

O&M Sector – The Sunken, Sinking & Floating

Daily Share price of Ezra, for the last 5 years, obtained from POEMS Mercury

O&M Sector – The Sunken, Sinking & Floating

Daily Share price of Nam Cheong, for the last 5 years, obtained from POEMS Mercury

The Floating

Investors who are keen to be vested in the O&M sector to sit out this down cycle are advised to look at counters that have stronger fundamentals in terms of debt servicing capabilities and balance sheets. Some examples of the counters are Keppel Corp and Sembcorp Marine. However, investors also need to be aware that any positive effect on oil prices will take at least 1-2 years to show on the bottom lines of these companies.

O&M Sector – The Sunken, Sinking & Floating

Daily Share price of Keppel Corp, for the last 5 years, obtained from POEMS Mercury

O&M Sector – The Sunken, Sinking & Floating

Daily Share price of Sembcorp, for the last 5 years, obtained from POEMS Mercury

POEMS Mercury has been rebranded as POEMS Pro! For more information, click here.


These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

About the author

Chong Kai Xiang (Kai)
POEMS Dealer
Raffles City Dealing Team

Chong Kai Xiang (Kai) is an Equities Dealer in the Raffles City Dealing Team, and currently provides dealing services to over 35,000 trading accounts.

Kai frequently conducts seminars to enrich his clients' trading and financial knowledge. Apart from this, Kai also provides weekly market updates to his clients to keep them informed and up to date on their stock holdings.

Kai holds a Bachelor Degree of Finance from the SIM University – UniSIM and was awarded the CFA Singapore Gold Award and CFP® Certification Achievement Award in 2015.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you


This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  


Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com