PACC Offshore Services Holdings - OCBC Investment 2016-07-01: Secures Prelude floatel job

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PACC OFFSHORE SVCS HLDG LTD POSH U6C.SI 

PACC Offshore Services Holdings: Secures Prelude floatel job

• Technip awards floatel work
• Profitable project
• Overall outlook remains dim

Wins floatel work for POSH Arcadia

• PACC Offshore Services Holdings (POSH) recently announced that it has won a contract by Technip Oceania Pty Ltd through its subsidiary POSH Semco Pte Ltd, to support Shell’s Prelude floating LNG facility using its semi-submersible accommodation vessel (SSAV), the POSH Arcadia. 
• Our earlier report, “Waiting for Shell Prelude tender results”, on 6 Jun had highlighted the possibility of POSH securing this contract, but we also noted that operations for the charter may only begin in Mar 2017. The 750-pax SSAV will provide accommodation support for the hook-up and commissioning phase of the Shell Prelude FLNG project in the Browse Basin in Western Australia. 
• According to Upstream , the contract period is for a relatively short period of six months, with three separate options covering one month each.

Still some profit to be made

• The value of the contract was undisclosed, but we understand that there is still a margin to be made from the project. We estimate that the charter rate would be higher than the c.US$125k/day rate for the POSH Xanadu in Brazil, but operating costs are also likely to be high in Australia due to more stringent requirements in general. 
• As for POSH Arcadia itself, it was delivered to POSH’s yard around end May. 
• Meanwhile, we also understand that there is a mobilisation fee which will be paid by the customer to POSH. We note that POSH Terasea was appointed to provide towage and positioning services for the Prelude project in Jan this year. This could have aided POSH in securing the SSAV contract.

Outlook still dim

• Looking ahead, pressure on charter rates and vessel utilization will continue to weigh on the group. The offshore accommodation segment has been supporting earnings for the group, but it is insufficient to offset weakness in other areas such as the OSV segment. It may also take some time before POSH can see a boost in earnings from POSH Arcadia, unless it secures work prior to Mar 2017. 
• Maintain HOLD with S$0.35 fair value estimate; we may turn buyers at S$0.32 or lower.

Low Pei Han CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-07-01

OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.35 Same 0.35