PACC OFFSHORE SVCS HLDG LTD
U6C.SI
PACC Offshore Services Holdings - SSAV contracts remain a key risk
- Non cash impairments lead to losses in 4Q/ FY15
- Uncertainty remains on contracts for the 2 SSAVs
- Balance sheet is relatively strong
- Final dividend of 0.5Sct declared
OSV segment is relatively strong, but will face inevitable headwinds.
- POSH’s OSV operations have been relatively resilient versus peers owing to longer term contracts – we estimate 65-70% utilisation rate as of end-2015.
- Nonetheless, we expect continued pressure on both day rate and utilisation fronts in the coming quarters.
Accommodation division performing well but SSAVs create downside risk.
- The accommodation division has assumed increased importance of late, accounting for 61% of gross profit in FY15.
- Gross margins for the division were also robust at about 40%. However, there remains downside risk from uncertainty surrounding the first SSAV, whose contract with Petrobras is ending in March this year with no renewal proposed yet, and the second SSAV, whose delivery date is before end of 1H16 and has yet to secure a contract.
Cutting forecast numbers in light of industry weakness.
- We have further lowered our utilisation and day rate assumptions for POSH’s OSV vessels going forward, and pushed out the contract for the second SSAV to FY17.
- We are also more cautious on contributions from JV/ associates, especially from Indonesia.
- Hence, we have reduced our FY16 and FY17F earnings by 73% and 41% to US$10m/ US$21m respectively.
Valuation:
- Despite the risk to earnings and impairments on assets in FY15, POSH’s balance sheet remains relatively strong with net gearing of only 0.5x and it has also managed to refinance existing loans on attractive terms. Thus, we maintain our HOLD call with a target price of S$0.28, based on a 0.4x P/BV multiple.
Suvro SARKAR
DBS Vickers
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Singapore Research Team
DBS Vickers
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http://www.dbsvickers.com/
2016-02-22
DBS Vickers
SGX Stock
Analyst Report
0.28
Down
0.29
