Sea change

By Rebecca Macfie

Monday 1st March 2004

There's nowt as slow to change as a seaman - or so they say in the maritime trade. The sharemarket, though, is another matter.

While Christchurch company Mooring Systems faces a titanic task weaning the deeply conservative shipping industry off traditional mooring ropes and onto its high-tech vacuum grip mooring system, its share price has darted nimbly through the roof since Christmas.

The punters' enthusiasm for the stock pumped the price from around $1.80 in late December to a high of $2.90 mid January, and by early February it was bobbing around the $2.55 to $2.60 mark. That's pushed the company's market capitalisation from around $21 million at the end of 2003 to around $31 million at the start of February.

For a company yet to make a profit, investors' enthusiasm for the stock puts pressure on founder and managing director, Christchurch entrepreneur Peter Montgomery, to prove its revolutionary mooring system not only works, but has a market beyond the few models already in place.

Mooring Systems' QuaySailor system uses vacuum pads mounted on the wharf to clamp to the side of the ship. Electronic monitoring technology sends real-time data about the mooring conditions to the ship's crew and Mooring Systems' offices in Christchurch.

The company says the system is not only significantly more efficient - it allows one person to secure a ship in eight seconds, compared with 14 people and 12 minutes using ropes - it's also safer because it eliminates one of the most dangerous jobs in the maritime trade.

Brokers say investors have been attracted to the stock because they find its product, potential market and business case easy to understand. Forsyth Barr advisor Liz Douglas says recent buyers have included people involved in the engineering firms contracted by Mooring Systems, many of them first-time investors.

Rob Mercer, head of research with Forsyth Barr: "What we like is that that you can see the operating costs and revenue, you can see that if you sell so many units you get this much, we can see the customers, and so on."

Forsyth Barr issued a buy recommendation on the stock in November, valuing it at $2.31. ABN AMRO Craigs picked it as a speculative buy in early January, saying it appeared to be "on the verge of success" and looked to have first mover advantage in the market.

The company has passed through several key development milestones since the mid 1990s, when Montgomery started developing the idea of a vacuum-based mooring system to replace ropes. As a young navigation officer he'd seen a seaman killed when a rope whipped back and hit the man across the chest - a traumatic event, but one he knew to be a common occurrence.

In 1999 he proved that vacuum mooring could work when the IronSailor, a ship-mounted system designed and built for Tranz Rail's new interisland ferry, the Aratere, was successfully commissioned. Mooring Systems was then floated on the New Capital Market in 2000 (subsequently graduating to the main board) to raise funds to develop a working prototype of the shore-based QuaySailor system. This has been in service at Picton since 2002, giving the company a chance to show off its invention to other potential buyers.

The Picton system helped win the custom of Australian client Patrick Shipping, which entered a $2.7 million contract for eight QuaySailors. These were commissioned at the Port of Melbourne and Devonport, Tasmania, late last year. So far, says Dale Emmerton, Patrick's national operations manager, the system is performing to expectations. He says the company was drawn to the system because it offers cost savings and is safer than ropes.

Another major milestone was winning a contract from the Port of Dover last year to supply an $840,000 QuaySailor, to be installed next month. Provided the system works well, there'll be an order for a further five. Dover will provide a critical testing ground for Mooring Systems. Not only is it one of the busiest ferry ports in the world, its huge surges and seven-metre tides will expose the QuaySailor to conditions as rough as it's ever likely to encounter, says Montgomery.

Dover's head of engineering, Graham Horner, says the port company was attracted by the ability of the QuaySailor to be used on a variety of vessels, and by the potential savings in mooring time and cost. "We also liked Mooring Systems' can-do approach." He estimates the system will pay for itself over the design life of ten years.

But it's early days, says Horner. "We have only ordered a trial unit at this stage and need to test this thoroughly before we can be sure we will get the claimed benefits."

Early days for Mooring Systems and its enthusiastic investors, too. After posting losses of $392,000 in 2002 and $509,000 in 2003, it is forecast to break even this year and post a $1.145 million profit in the year to March 2005. But success in the long run depends on convincing many more of those resistant-to-change mariners to toss away the ropes they and their forebears have used for hundreds of years, and embrace a little Kiwi ingenuity.

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