Rotary may take stake in storage terminals

Singapore :  Singapore oil and gas infrastructure services firm Rotary Engineering said it is expanding its horizon to building, owning and operating oil storage terminals in Southeast Asia and the Middle East.

The firm has done early engineering and design work on a few projects worth $150-350 million (Dh550-1,285 million) each in the United Arab Emirates and Southeast Asia, said Chia Kim Piow, Rotary's chairman and managing director.

He did not give details but said Rotary had the capacity to take up to a 30-40 per cent stake in such projects in Indonesia, Malaysia and Vietnam.

"This will be the next trend of expansion for us," Chia said. "This is just a natural progression for our kind of business."

"We are EPC [engineering, procurement, construction] contractors, but ultimately we might take some stakes in some build-own-operate or build-own-transfer projects."

Any outlay on these projects would likely be 70 per cent funded through project financing and the rest using internal resources.

"The move towards BOO or BOT is a positive development because it will give them recurring income, but how much it is going to contribute to their bottom line is not clear yet," said Yeo Zhi Bin, an analyst at CIMB Research.

Rotary was trading at S$0.935 around 3.10pm GMT, down 11 per cent so far this year, but Yeo has an "outperform" rating and target price of S$1.17.

The Singapore-based firm reported a six per cent increase in its second quarter net profit to S$13.7 million (Dh37.2 million) from a year ago mainly on the back of a large project in Saudi Arabia.