How did GSS Energy(41F) achieve a YTD yield of 122.35% in 3 months?

How did GSS Energy(41F) achieve a YTD yield of 122.35% in 3 months?


Photo source: GSS Energy is moving into energy trading, after starting a joint venture with oil trading company AFCO Energy.
PHOTO: KEPPEL SHIPYARD

GSS Energy Limited, engaged in the precision engineering business, was established in 1979 and subsequently listed on the Singapore Stock Exchange in February 1993. The Group’s reportable segment are organised on a regional basis into two main operating businesses, namely:
1. Precision Engineering (PE)
2. Oil & Gas

Recent performance summary:

In the financial year of 2016, the group has recovered from the loss in previous year, with a significant improvement of profitability. The business strategy has changed. The firm added oil and gas into its segments gradually since 2015, however, has not recognised any return from the new business yet. The geographical emphasis has shifted from Singapore to Indonesia, and possible reason is that GSS Energy can benefit from the joint venture with a local company that is owned by Indonesia government. The group is experiencing a strategic transformation and has acquired sufficient fund from share issue to support their decision.

Recent Event & News:

Full Yearly Results of 2016 (Unaudited) was released on 28 Feb, 2017. See attached report below.

“GSS Energy Disclosure of Interest/ Changes in Interest of Director/ Chief Executive Officer”, happened on 1 March, 2017. Refer to the details of change here.

“GSS Energy: Reports Strong Earnings Of S$10.6 Million For FY2016”, on 1 March, 2017. Refer to the post here.

Key Financial Highlights:

1. In the financial year of 2013, GSS Energy reached their peak in revenue, which is distributed from the revenue from Mechanism business in local market, as revenue from the other two segments offset with each other. GSS Energy has experienced a 45.6% decline in revenue at 2014 compared to that of 2013. In the financial year of 2015, the group suffered from further drop in revenue and turned out to bear a loss of $29.5m at the end of the year. However, GSS Energy managed to swing back to black in the financial year of 2016, and observed the rally of $9.9m net profit with a profit margin of 13.09%.

2. Two aspects of GSS Energy’s segments worth paying attention to: 1) The induction of Oil production business 2) The shift of business from Singapore to Indonesia.

From the table, we can find that GSS initiated their business in the Oil production since 2015. In 2015, Oil extraction segment brought $38.5m loss to the group. When it comes to 2016, the group merged the segment of Mechanisms and Microshafts into a new sector called precision engineering (PE), and also expanded the Oil extraction segment with another kind of natural resources: Gas. However, the performance of Oil & gas segment is not satisfied as no contribution from the Oil and gas sector observed in 2016 result. The group had a consolidated revenue of $75.71m in 2016, contributed entirely by the PE business.

From a geographic perspective, most of GSS Energy’s turnover was driven by local business until 2014. Weight of Indonesia segment has surged to 53% of the total turnover in 2016, which is 33% greater than revenue distributed from the local market. Additionally, the group offer their oil drilling services in West Jambi, Sumatra Indonesia.

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