SINGAPORE (Nov 16): CIMB is maintaining its “reduce” call on Mermaid Maritime with a target price of 14 cents, as the group’s 3Q17 results were largely below expectations.
The group on Monday announced that it recorded a loss of US$2.04 million ($2.77 million) in 3Q17, compared to earnings of US$7.49 million in 3Q16.
Revenue decreased 41.2% y-o-y and 32.1% q-o-q to $30.6 million, on the back of fewer project executions due to delays in Southeast Asia (SEA) projects and political uncertainties in the Middle East.
See: Mermaid Maritime sinks into the red; posts 3Q losses of $2.8 mil
The group’s management says that some projects have kick-started in 4Q17, and thus expects a better 4Q17.
During the quarter, the group’s order book increased to US$174 million from US$99 million in 2Q17, following the extension of a Saudi Aramco subsea contract in September.
Other large global subsea companies, such as Subsea7 and TechnipFMC, said during their 3Q17 results that a gradual recovery in tendering activity and guided for awards from 1H18F.
In a Wednesday report, analyst Cezzane See says, “However, Mermaid Maritime said that its portion of the awards typically lags major companies. As such, we believe that contracts for Mermaid Maritime will likely emerge only in the latter part of CY18F.”
The group’s management guided that a decision on Asia Offshore Drilling (AOD) will likely have to be taken by year-end, as its Senior Secured Credit Facility (SSCF) with an outstanding balance of US$209 million at Sept 2017 matures in Apr 2018 with a balloon payment of US$180 million.
Options for AOD are to participate in Seadrill’s restructuring package deal or source its own restructuring deal. The three drilling rigs in AOD recorded 100% utilisation in 3Q17.
“We await the Seadrill decision for better clarity on the stock,” says See.
As at 10.55am, shares in Mermaid Maritime are trading at 14 cents or 0.42 time FY17 book.
