Pacific Radiance - CIMB Research 2018-01-12: Cleaning Up Mode

PACIFIC RADIANCE LTD. T8V.SI

Pacific Radiance - Cleaning Up Mode

Pacific Radiance (PACRA)’s 9M17 net loss of c.US$37.1m was largely unchanged yoy despite lower revenue due to better cost control. But conditions remain tough.
PACRA recently announced that it will be convening its second informal meeting with Noteholders in Jan 18. We expect a Consent Solicitation Exercise (CSE) to ensue.
Maintain REDUCE call with Target Price of S$0.073 based on FY17F P/BV of 0.15x, slightly below -1 s.d. P/BV of 0.18x; to account for debt restructuring risks.

PACRA reported a slightly lower 9M17 core net loss of US$36.0m (vs. core net loss of US$37.1m in 9M16) despite a lower revenue of US$48.7m (vs. 9M16’s revenue of US$57.3m), largely on the back of cost containment exercises.
We expect 4Q17F to be similarly weak, as we note overall charter rates are still stickily low. We forecast a FY17F net loss of US$46.1m.

In 2Q17, PACRA guided that customers were awarding more contracts, especially from Indonesia, India and Middle East, and maintains that there are subsea awards; but these are mainly short-term in nature of 3-6 months’ duration.
During its 3Q17 results presentation, PACRA said the outlook for the next 12 months was still vulnerable to the threat of an oil price pullback and charter rates staying low due to oversupply.

In 2Q17, PACRA announced that it had appointed advisors to assist in reviewing its overall capital structure. It then convened its 1st informal meeting in Dec 17.
PACRA recently announced that it will be convening its 2nd informal meeting with its Noteholders in Jan 18.
No timeline was guided on the potential completion of this capital structure reform, but judging by the steps taken by its peers like Ezion, informal meetings are typically followed by Consent Solicitation Exercises (CSE).

We remain cautious on the stock given the impending near-term restructuring and maintain our REDUCE rating. Our Target Price of S$0.07 is based on an FY17F P/BV of 0.15x (slight discount from the -1 s.d. of 0.18x), in line with the stocks that are currently ongoing restructuring.
Upside risks are a successful restructuring exercise and better-than-expected vessel utilisation.

Cezzane SEE CIMB Research | LIM Siew Khee CIMB Research | http://research.itradecimb.com/ 2018-01-12

CIMB Research SGX Stock Analyst Report REDUCE Maintain REDUCE 0.073 Same 0.073