French GTT, which designs hull linings for liquefied natural gas (LNG) carriers, said in its IPO prospectus on Monday it expects strong growth in the LNG market and is confident it can stave off a threat of competition from its own customers, the shipbuilders.
Gaztransport & Technigaz (GTT) chief executive Philippe Berterottiere told reporters GTT shareholders Total and private equity firm Hellman & Friedman plan to sell part or all of their 30 percent stakes.
However, lead shareholder GDF Suez will hold onto its 40 percent stake in the offer, which is expected in February, a source close to the company added.
Berterottiere declined to provide a timing or valuation for the initial public offer but an industry source said in June GTT had been valued at between 1.3 and 1.8 billion euros.
In 2012 the company earned a net profit of 40 million euros on sales of 89 million euros, according to the IPO prospectus and GTT expects 2013 sales to more than double to 215 million euros and sees 2014 turnover of at least 223 million euros. Net profit should grow in line with sales and remain at about 50 percent of sales, GTT said.
The companies in the Thomson Reuters Global Oil and Gas Transportation Services index with an operating margin of more than 25 percent, excluding pipeline firms, have a median price/earnings ratio of 18. That multiple would price GTT's 2013 estimated net profit of just over 100 million euros at about 1.8 billion euros.
LNG SHIPPING FUEL
GTT's earnings can swing wildly, however. Sales fell from 251 million euros in 2008 to 75 million in 2010 and 56 million in 2011, when GTT had a profit of just 16 million euros.
Berterottiere said that because of the long lead times in tanker orders the full impact of the 2008 crisis did not hit earnings until 2011.
But then the 2011 Fukushima nuclear accident brought a surge in demand for LNG shipments in Japan and Korea, while growing U.S. shale gas exports has boosted tanker orders and there was also growing demand for LNG as a shipping fuel.
"As environmental regulation tightens, the increased use of LNG as a shipping fuel will boost demand for GTT's services," Berterottiere said.
GTT designs the double layers of insulation and thin nickel-iron alloy Invar sheeting that line the inner hulls of LNG tankers that ship the gas cooled to minus 163 celsius.
At the end of 2012 244 of the world's 352 LNG carriers used GTT linings, but of the 109 carriers ordered between 2008 and September 2013, 101 used GTT, further cutting the market share of GTT's sole competitor, Norwegian company Moss Maritime.
GTT does not install the hull linings itself, but its 344 staff act as engineering consultants to its shipyard customers.
Moss, which is a part of Italy's ENI-Saipem group, ships LNG in spherical aluminium tanks but Berterottiere said they waste more hull space and are heavier, which makes them about 10 percent more expensive. A 170,000 cubic metre LNG tanker costs $200-210 million, with 4 percent of the cost due to the GTT lining.
While Moss is losing market share, GTT's customers are trying to develop their own technology.
But Berterottiere said he was confident that gas companies would not want to take the risk of trying other technologies and that GTT's position, sitting between the shipyards and gas companies, was a strength.
"The value of our company is in its independence," he said.
Nevertheless, Samsung Heavy Industries, GTT's main customer accounting for 38 percent of sales, along with a Korean science institute, is trying to develop its own LNG system, the IPO document said.
Hyundai Heavy Industries, another top customer, and South Korea's state-run gas company Korea Gas Corp (KOGAS) are also looking at gas containment systems.
GTT made 96 percent of its 2012 sales from five Korean shipyards, including Samsung, Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy, Hyundai Samho Heavy Industries and STX.
Last year three Korean shipyards considered making a joint billion-euro bid for GTT, industry sources said, but nothing transpired.
By Geert De Clercq (C) Reuters 2013.