SAPEX paves the way for its future success

Often, it’s the simplest problems that inspire the most ingenious solutions, and the question of how large resource companies can access inhospitable terrain has certainly provided both of those elements. Overtly, getting from point A to point B isn’t complex. However, as the US military discovered, even tanks can get bogged.

In response, the US military devised a system of Composite Mats that allowed its vehicles to traverse across warzones without getting their feet wet. Is a system of matting particularly awe inspiring? Not enormously. Does this technology solve a crucial and costly problem for some of the world’s largest companies seeking access to increasingly inaccessible parts of the world, however? Absolutely.

Composite Mats have considerable advantages; they’re cheaper than roads, they’re more environmentally friendly to construct than roads, and they’re reusable, meaning when you’re finished with a project they can simply be lifted up and reused. In an industry where environmental impact has become a large rod used to beat some of the globe’s biggest players, using mats is an easy win that provides a better solution than the alternative options.

In late 2018, SAPEX, who hold the exclusive licence for distributing these US military grade Dura-Base mats within Indonesia, closed a significant deal with SAKA Indonesia, valued at USD $3.66 million. However SAKA is not the only large tie-up targeted by the company as SAPEX has its eye on negotiating deals with another two foundational clients to build its base even further.

These Composite Mats represent a great investment too, providing high margins on a product that recoups its purchase cost in only 18 months, and having a long lifespan, means they generate quick, yet strong, cashflow. In terms of the composition of the current mat inventory, most are rented to long term clients, with an overall utilisation rate of 80%.

Reaffirming this and answering questions about the company’s future was Chairman, Peter Chambers, who provided a corporate update to shareholders and prospective investors last week.

The company is expecting to generate significant top line and bottom line growth, that will be driven by a combination of;

• Deployment of an expanded mat inventory
• A customer portfolio of long term and short term mat users
• Revenues from both the government and private sectors

Presently SAPEX is focused on the oil, gas and mining industries, but it has a view to further expansion. Part of this process will be building regional partnerships, and looking at other markets such as agriculture and infrastructure construction, where it is easy to see an application for the product. SAPEX is looking to lock in its year end revenue number by the end of June, which should be a sign that the company is confident in its capacity to negotiate more long-term deals. With an ASX listing on the horizon for mid-this year, it’s an exciting time for a company supplying an unexciting, and yet extremely useful product.

Investors can view the latest investor briefing here.

---

SAPEX Group trades under the NSX code: ‘SAA’

More information on SAPEX Group can be found at their Investor Centre.

*Reach Markets is paid a retainer to assist SAA with private investor management.