PACC Offshore Services Holdings - OCBC Investment 2015-11-04: 2016 Growth Dependent On SSAVs

PACC OFFSHORE SVCS HLDG LTD POSH U6C.SI

PACC Offshore Services Holdings - 2016 Growth Dependent On SSAVS

Pacc Offshore Services Holdings (POSH) reported a 20% YoY rise in revenue to US$80.4m and a 14% drop in net profit to US$12.6m in 3Q15, such that 9M15 net profit of US$18.7m accounted for 53% of our full year estimate.
On a QoQ basis, however, net profit improved from 2Q15’s US$6.1m.
Earnings were driven by the offshore accommodation segment, which saw contributions from POSH Xanadu and three new 238-pax light construction vessels.

As at 30 Sep 2015, POSH has 14 newbuilds contracted for delivery, and these include one SSAV (4Q15), one light construction vessel (2Q16), two IMR vessels (4Q16, 1Q17), one AHTS (1Q16), two PSVs (both 2Q16), two AHT vessels (1H16), two harbour tugs and three more JV vessels.
In terms of the capex for these vessels, US$594m has been paid, with US$177m outstanding.

We are not too focused on earnings this year, given that we are nearing the end of the year and many investors would consider 2015 a tough year (and one to forget) for the offshore and marine industry. Instead, we will be monitoring the progress of contracts secured for 2016, including the 2nd SSAV (POSH Arcadia) which is expected to be delivered by the end of this year; we do not exclude the possibility of a further delay.

POSH Xanadu, which is on a 1+1 year contract, will see its contract end in Mar next year; we are currently expecting the one year option will be exercised, but likely at a reduced charter rate.
Looking ahead, the industry is still expected to remain weak, but since the stock price has decreased about 11% since our downgrade to sell on 5 Aug, we upgrade our rating to HOLD, with an unchanged fair value estimate of S$0.33 (based on 7x FY16 earnings).

Low Pei Han CFA OCBC Securities | http://www.ocbcresearch.com/ 2015-11-04

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