MTQ Corporation (SGX:M05) is a engineering solutions provider specializing in the oil and gas, marine, and mining industries. With a focus on providing integrated services and innovative solutions, MTQ has established itself as a trusted partner for its clients in the energy sector.
Leveraging its expertise and extensive experience, MTQ Corporation offers a comprehensive range of services, including maintenance, repair, and overhaul (MRO), fabrication, and engineering solutions. The company’s commitment to excellence, customer satisfaction, and operational efficiency has positioned it as a key player in the industry. Through strategic partnerships and a focus on sustainable growth, MTQ Corporation continues to drive innovation and create value for its stakeholders in the dynamic energy sector.
MTQ Corporation presents an attractive investment opportunity based on its strong financial performance, strategic initiatives, and potential for business turnaround.
Strong Financial Performance:
- In its latest FY2023 full-year report, MTQ Corporation reported total revenue of SGD 83.8 million, reflecting a 61% increase compared to the previous year of SGD 52 million.
- The company achieved a net profit of SGD 3.8 million, a significant increase from a SGD 1.28 million in the previous year.
- The company generated strong operating cash flow of SGD 5.2 million, demonstrating its ability to generate cash from its core operations.
Business Turnaround Potential
- MTQ Corporation was hit hard during the pandemic. Recording loss in revenue and profit in FY21. They managed to swung back to profitability in FY22 and continue to build on their performance this year.
- MTQ Corporation has implemented strategic initiatives to drive its business turnaround, including streamlining operations, focusing on core competencies, and pursuing cost optimization.
- The company’s efforts have resulted in improved operational efficiency, enhanced profitability, and a positive trajectory towards sustainable growth.
Business Growth and Potential in Bahrain:
Established Presence:
- MTQ Corporation has successfully established a presence in Bahrain, setting up operations and developing local partnerships. This has enabled the company to tap into the country’s growing energy sector and benefit from the increasing demand for engineering services.
Financial Performance in Bahrain
- In the latest financial report, MTQ Corporation reported that its Bahrain operations contributed approximately SGD 40 million in revenue, representing 48% of its overall business.
- The company’s Bahrain operations have demonstrated growth, with a revenue increase of 67% compared to the previous year. This growth indicates the success of MTQ Corporation’s business strategies in the Bahraini market.
Market Expansion and Potential
- MTQ Corporation’s established presence and successful project engagements in Bahrain provide a solid foundation for further market expansion. The company has the opportunity to capitalize on the growth potential in Bahrain’s energy sector.
- Bahrain’s strategic location in the Gulf region positions it as a hub for energy-related activities. MTQ Corporation can leverage its presence in Bahrain to explore opportunities in neighboring markets, creating avenues for further business growth.
Increase in Rig Activity in Middle East Bodes Well
Westwood Global Energy Group predicts that onshore drillers are poised for boom times in the Middle East, as Saudi Arabia and the United Arab Emirates aim to boost capacity. We can also see that the Middle East Rig Count is slowly steadily increasing.
One of MTQ’s bigger customers, Schlumberger Limited ($SLB) has stated in their recent 2023 earnings release that they are bullish in activity outlook for the Middle East segments.
By leveraging its established presence, successful project engagements, and the supportive business environment in Bahrain, MTQ Corporation is well-positioned for continued business growth in the region. The company’s financial performance in Bahrain, with significant revenue contributions and growth, further reinforces its potential for generating favorable returns for investors.
Catalysts
- Recovery in the oil and gas industry: With oil prices stabilizing and the industry gradually recovering, MTQ Corporation stands to benefit from increased exploration and production activities, leading to higher demand for its engineering services. I also expect MTQ to continue its growth trajectory in their Bahrain business.
- Ongoing focus on innovation and technology: MTQ Corporation’s commitment to innovation and technology adoption positions it to capitalize on emerging trends, such as digitalization and sustainability, in the energy sector.
- In FY23, MTQ was in the process of relocating from its current Pandan Loop property to its new HQ in Tuas. They incurred roughly $2mil in relocation cost, which will be a one-time off cost. This will translate to higher profitability of the company.
Valuation and Returns
- MTQ Corporation’s stock is currently trading at a price-to-earnings (P/E) ratio of 13.38, which is in a healthy range.
- The company’s price-to-book (P/B) ratio of 0.8 suggests that the stock is trading below its book value, further highlighting its attractive valuation.
- MTQ has seen improvement in its operating and net margins. As well as its ROE and ROA.
Risks and Mitigating Factors:
It is important to consider potential risks associated with investing in MTQ Corporation, such as volatility in oil prices, geopolitical factors, and industry competition. However, the company’s diversified operations, strong financial position, and focus on operational efficiency help mitigate these risks.
The engineering solutions sector is highly competitive, but MTQ Corporation’s established reputation, industry expertise, and customer relationships provide a competitive advantage.
MTQ Corporation presents an attractive investment opportunity with its strong financial performance, strategic initiatives, and potential for business turnaround. The company’s solid financial results, diversified market presence, and commitment to innovation position it for long-term growth in the energy sector.