Koon Yew Yin's Blog

Carimin - As I See It - Koon Yew Yin

Koon Yew Yin
Publish date: Thu, 07 Feb 2019, 11:57 AM
Koon Yew Yin
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An official blog in i3investor to publish sharing by Mr. Koon Yew Yin.

All materials published here are prepared by Mr. Koon Yew Yin

In the last 3 trading sessions, the price went up from 60 sen to 70.5 sen to 74.5 sen to 84.5 sen; an increase of 11.5 sen, 3 sen and 10 sen. Many of my followers have bought it and sold to take profit, many have not sold and a few did not even buy. Invariably, they all wanted to know what they should do next. I would think many of the readers here also want to know my opinion. 

As I said before, I do not need readers to buy to support the share price to help me because the daily traded volume is so huge that whether you buy or sell would not affect the share price.

However, here is my opinion.

As you can see from the above chart, the price started to climb as soon as the company reported its 1st quarter EPS of 5.01 sen in late November last year. In 2.5 months, the price has shot up about 300%.

In my previous article “Carimin - Wait for Correction Strategy” I said that since the price corrections were unusually small, if you waited to buy, you would be disappointed. True enough, the next day, the price shot up from 60sen to 70.5 sen, an increase of 10.5 sen, equal to an increase of 19% in one day.

In any normal case, many investors would have sold to take profit since it has gone up 300% within 2.5 months. But in this case, it is very different. Simply it is because it started shooting higher when the price was at its record low since its listing. Its IPO price was Rm 1.10 in 2014. If it reported EPS of 5 sen when its share price was Rm 2.00, this news would not be so attractive.

Schedule of rates contract

Petronas has about 220 pumping oil rigs scattered all over Peninsula Malaysia, Sabah and Sarawak. The average cost for offshore rigs can be as much as 15 to 20 times greater than the average cost for land rigs. The least-expensive offshore rigs typically cost nearly US$200 million. The average price for offshore oil-drilling rigs is approximately US$650 million.

All these rigs are made of steel which rusts especially those subjected to salty sea water. All these rigs require constant maintenance and Petronas has given out maintenance contracts based on schedule of rates to 5 contractors of which Carimin is one of them. Schedule of rates contract means there are fixed prices for various items of work such as painting, remove and replace rusted steel sections etc.

If you look at the prices of oil rigs, you can understand why Petronas had to spend large sum of money for maintenance contract and the contract awarded to Carimin is Rm 200 million per year for 5 years, totalling Rm 1 billion with an extension of 1 year.  

Just based on its strong earning, the company must be very efficient and most likely the company can secure more contracts from Petronas. As a result, the company will have a very good profit growth prospect which is the most powerful catalyst to move share price.  

My sole purpose of writing this article is to offer more detailed information for investors to make well informed decisions. The following are additional useful information:

I am not encouraging readers to buy or sell. As I said before, the daily traded volume often exceeded 10 million shares and whether you buy or sell would not make any difference.  

I have not sold my holdings because I believe the share price will most likely go up higher and higher.



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