PACC Offshore Services Holdings - OCBC Investment 2016-05-05: Buoyed By JV in 1Q16

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PACC OFFSHORE SVCS HLDG LTD POSH U6C.SI 

PACC Offshore Services Holdings - BUOYED BY JV IN 1Q16

• Results in line
• Offshore accom supporting earnings
• Insufficient to offset weakness in other areas

1Q16 results in line

• PACC Offshore Services Holdings (POSH) reported a 2% YoY rise in revenue to US$58.7m and net profit of US$4.5m in 1Q16, compared to US$21k in 1Q15. 
• 1Q16 net profit accounted for 26% of our full year estimates, hence in line with expectations. 
• What made the difference was mainly the US$4.9m share of results from JVs in 1Q16 vs. US$1.3m loss in 1Q15, and a key reason was due to the better performance of POSH Terasea, a collaboration with Ezion Holdings. 
• We understand that more towage work was undertaken in the past quarter, but it is hard to tell whether this run rate would continue as the nature of the work is relatively more ad hoc.

OSV utilization of 67% in 1Q16

• As before, the offshore accommodation business was the segment supporting earnings. Revenue from this segment increased from S$13.1m in 1Q15 to S$28.4m in 1Q16 due to the full employment of POSH Xanadu, and three new 238-pax light construction vessels which was partly offset by lower charter rates and utilization of other vessels. 
• Unsurprisingly, the offshore supply vessel segment saw a 36% drop in revenue to S$21.0m, and even incurred a gross loss of US$460k in the quarter. 
• OSV utilization was 67% in 1Q16 vs. 82% in 1Q15.

Delivery of POSH Arcadia still mid 2016

• With the contract renewal of POSH Xanadu, the market is likely to focus on the second SSAV, POSH Arcadia, which is scheduled to be delivered mid this year. The unit is still bidding for work in West Africa, Australia, and the North Sea, amongst others. 
• We conservatively assume that revenue contribution from this unit will only start in 2017.

Outlook is still dim

• Looking ahead, POSH continues to expect that pressure on charter rates and vessel utilization would have a negative impact on its financial performance for FY16. 
• However, given the recent stabilization in oil prices and ongoing rebalancing in the oil market, we increase our valuation from 0.4x to 0.5x P/NTA for POSH, such that our fair value estimate rises from S$0.28 to S$0.35. 
• Maintain HOLD.

Low Pei Han CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-05-05

OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.35 Up 0.28