Jason Marine: another net-net in Singapore

Recently I have been looking at a bunch of Singapore listed stocks. I already owned one Singaporean net-net, PNE Industries and have since picked up two more. In this post I will discuss the first one.

Jason Marine

Jason Marine (ticker: SGX:5PF) is a marine electronics systems integrator and support services provider for the marine and offshore oil and gas industries. The company has its headquarters in Singapore, but the company has also expanded to other countries in the region, like China, Indonesia, Malaysia and South-Korea.

Jason Marine works with a number of partners that supply equipment (e.g. navigation systems, communication equipment). The company can then install the equipment on the ships of Jason Marine’s customers. It can be complex to get all the different pieces of equipment functioning properly on a ship and therefore there is a need for customers to hire a party that has the expertise to do this. The actual manufacturers of the equipment often also need a partner like Jason Marine to service remote parts of the world where they are not established yet. Jason Marine also provides maintenance services for the equipment.

In the 2010 annual report it was mentioned that Jason Marine’s revenue comes in on a project basis and that it is mostly derived from contracts tendered by new ships. This is probably an important reason why the stock is cheap right now. The shipbuilding industry in Asia is depressed, especially in China. Looking at Jason Marine’s revenues shows an ugly picture: they have dropped from $71m SGD in the year ended 03-31-2009 to just $38m in the year ended 03-31-2013. Net income suffered obviously and has dropped from $6.4m to just $0.4m.

The good news is that the stock is very cheap. The market cap of Jason Marine is $12.5m. The company has a book value of $24.9m. Current assets total $32.3m and include $13.5m in cash, $14.2m in receivables and $4.4m in inventories. Total liabilities are $10.5m, giving Jason Marine a net-current asset value of $21.8 million.

The executive chairman and founder of the company, Foo Chew Tuck, owns 76.7% of the outstanding shares.

The question is whether Jason Marine can keep operating profitably. The company has takes some measures and has reorganized the business:

“The Group managed to turn its results around from a net attributable loss in the first-half of FY2013 to remain profitable for the full-
year due to higher revenue achieved in the second-half of FY2013 and conscious cost management measures that were taken.

Re-Charting Our Strategy
This reversal during the second-half of FY2013 did not happen by chance. We recognised the need to re-chart our strategy and position to work towards sustainable growth for the Group.”

Time will tell whether Jason Marine can grow their revenues and profits again. At the current price you’re certainly not paying for growth. The company is priced as if it is going down in flames and that seems overly pessimistic to me. Perhaps part of the reason is that the company went public in late 2009 and that investors have only seen things go downhill from there. At a certain point there is total capitulation among many shareholders and that might be happening here. Also, Jason Marine has a small float and is illiquid which I think tends to depress prices extra when news is bad.

With the shares trading at 0.57x NCAV, the company still operating profitably and cash flow positive, I think Jason Marine is a good choice for a basket of net-nets.

Disclosure: long Jason Marine