KS Energy to slash losses

Analysts are forecasting a single-digit net loss of S$3.5 million compared to FY11’s S$78.8 million.

OCBC Investment Research noted:

KS Energy reported a 23.4% fall in revenue to S$151.6m and a net profit of S$692k in 2Q12 vs. a net loss of S$5.5m in 2Q11.

Revenue was within our expectations, accounting for 22.3% of our full year estimates. 1H12 revenue and gross profit accounted for 50.3% and 50.7% of our full year estimates, respectively.

Net profit was also within our expectations. 2Q12 marks the group’s first quarterly net profit after nine consecutive quarters of net losses, and results were also not boosted by any significant one-off gains, unlike 1Q12.

Revenue from the distribution business, which accounted for 71.1% of total revenue, saw a
26.3% QoQ increase in revenue in the last quarter, while the drilling division rose 11.8%.

We understand that all of the group’s core assets are currently on hire and it is unlikely that any of them will be coming off-hire for the rest of this year.

Business in the distribution is improving, and coupled with smooth execution in the drilling division, the group may break even in FY12F.

However, we are conservatively forecasting a single-digit net loss of S$3.5m for now, which is a significant improvement from FY11’s S$78.8m net loss.