XMH has a strong pipeline of developments that will help sustain its topline growth as it rides on Indonesia's firm demand for tug and barge trans-shipment.
'Marketing efforts are underway in Vietnam and India. We expect orders from Vietnam to materialize soon,' said CEO Elvin Tan.Photos by Sim Kih
DEMAND FOR coal trans-shipment in Indonesia has remained robust despite coal prices falling over the past two years. There’s good reason for this: Indonesian coalminers have been ramping up output to maintain cash flows.
SGX-listed XMH Holdings, a solutions provider of diesel engine, propulsion and power generating systems, has been riding on this trend.
Coal is transported within Indonesia via tugs and barges, and over 60% of XMH's revenue comes from Indonesia.
It posted record revenue of S$97.6 million in FY2013 (year-end 30 April), a 56.9% year-on-year increase.
Net profit was up 20.1% at S$11.4 million. This boosted cash reserves by 11.5% to S$43.7 million as at 30 April.
Profitability, plus a strong balance sheet, enabled XMH to propose a special dividend of 0.2 cent for FY2013 in addition to its regular 1-cent dividend.
Its cash hoard will be boosted by S$9.92 million after the proposed placement of 36 million new shares at 27.74 cents to prominent angel investor Koh Boon Hwee’s investment vehicle, Credence Capital Fund II, is approved by SGX and shareholders.
When Mr Koh’s interest was made public in the morning on Mon 20 May, XMH's stock price shot up and has remained above 40 cents since. This is some 40% above its closing price of 29 cents on Fri 17 May.
Positions that Mr Koh has held in the last three decades include being managing director of Hewlett-Packard in Singapore, chairman of SingTel, Singapore Airlines, and DBS Bank, and being a director on Temasek Holdings' board.
'Being a Singapore brand will help us expand ACEGEN's geographic footprint out of Indonesia,' said Deputy CEO Alphonsus Chia.
"We have a strong pipeline of developments that will help us secure more orders," said XMH CEO Elvin Tan at a recent investor meeting.
XMH’s solutions are used in tugs and barges, offshore support vessels, bulk carriers, tankers and fishing vessels, as well as buildings. Some of its latest corporate developments include:
1. IPS solutions, a service that enables vessel owners to combine different brands of power generation components for their propeller-based propulsion systems. This has done well in FY2013.
2. Power generating sets (gensets) and silencers assembled in-house by new subsidiary, ACEGEN. This was set up in 2013 and its first delivery is due this month. ACEGEN offers cost-effective alternatives to branded gensets like Mitsubishi.
3. Scania, a new brand for authorized distributorship by XMH, was acquired in 2013. This brings the total number of brands represented to 13.
4. A new logo projecting an international brand image has been adopted and its rebranding exercise will be completed this month. The former logo projected a family business image.
'When one particular niche sub-sector in the marine sector slows down, there will be other sub-sectors picking up,' said executive director Sam Chua
5. New assembly and production lines that will be ready by 2016.
6. Increased general warehousing capacities that will be ready by 2016.
Below is a summary of questions raised by analysts and fund managers at the investor meeting and replies given by the management, which includes the CEO, deputy CEO Alphonsus Chia, executive director Sam Chua and financial controller Johnson Yap.
Q: How does your IPS package differentiate itself from the competition?
IPS integrated propeller system is our customization service that allows customers to combine different brands of components (gearbox, diesel engine, propeller, etc.) in a single system. Currently, IPS is the only service in the market that ensures compatibility in small to medium sized power generation sets.
We are focusing on marketing this 
'We have a strong balance sheet with a net cash position,' said financial controller Johnson Yap.service in the marine sector, but intend to eventually extend it to the industrial sector. The requisite skill set and engineering expertise is something that we have accumulated over the years.
Q: What is your revenue split between tugs and offshore support vessels?
Tugs contribute more than 70% of revenue. Revenue from tugs is very consistent. More than 60% of tug and barge demand in Indonesia comes from coal transportation.
Q: Are you exposed to forex risk when you buy and sell inventory?
We try to buy and sell in the same currency. There is some translation impact from the volatility in Yen. A weaker Yen is good for the customer, so that gives us more orders.
Q: How does the placement of shares to Credence help since you are already cash rich?
Credence has the expertise to help our expansion. For example, Credence is able to advise us operationally as we embark on the conversion of industrial engines for marine vessel use (marinisation), warehousing logistics and manufacturing of ACEGEN products.
Q: What businesses are you looking to acquire?
We are looking for profitable and established businesses that are able to expand our value proposition to shipowners. We prefer companies with proprietary products, though those need not be engine equipment.
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