SINGAPORE (Aug 2): DBS says PACC Offshore Services Holdings (POSH) is ready to ride the gradual upswing as the OSV (Offshore Support Vessels) market has bottomed out.
POSH continues to be a safe name to ride the gradual offshore service sector recovery, says DBS, given it has no bonds outstanding and positive operating cashflows year to date in FY17.
In addition, POSH is also a potential privatisation candidate with high ownership of 81.89% by majority shareholder Kuok (Singapore), adds the brokerage.
In a Wednesday report, analyst Suvro Sarkar sees positive earnings momentum in 2H17 for POSH as the rig and OSV market has decidedly bottomed in 1Q17, with the offshore working rig count now up about 6-7% from its February lows.
Additionally, Sarkar thinks the market has overlooked the fact that POSH made the largest impairments as a percentage of fleet assets over FY15/16.
In 2Q17, POSH’s core losses halved q-o-q on an improvement in OSV utilisation to 64%, as six out of 12 OSVs on long-term charters in the Middle East began work; The remaining six will be deployed in 2H17, giving a further boost to earnings.
JV/associate income was also positive as POSH Terasea JV secured a healthy towing workload during 2Q17.
Key semisubmersible accommodation vessel (SSAV) POSH Arcadia is also slated to start work on the Shell Prelude FLNG project shortly.
“We think POSH’s SSAVs can earn more than US$3 million ($4.1 million) in gross profit per quarter each if fully utilised. Thus their earnings potential is large, and SSAV contract wins are a key catalyst,” says Sarkar.
“We maintain our “buy” call with unchanged target price of $0.41 (pegged to 0.8x P/B),” says Sarkar.
As at 1.20pm, shares in POSH are trading 1 cent higher at 30 cents.
