SINGAPORE (Nov 15): DBS Group Research believes PACC Offshore Services Holdings (POSH) in “the safer bet” to ride on the recovery of the offshore industry.
“We believe the offshore support vessels (OSV) market has bottomed, and POSH is poised to ride the gradual upswing,” says DBS lead analyst Suvro Sarkar in a report on Tuesday.
POSH reported a net loss of US$9.8 million ($13.3 million) in 3Q17, faring worse than DBS’ expectations as a result of a weaker-than-expected offshore accommodation (OA) segment.
However, the analyst forecasts that POSH’s results should improve in 4Q, on the back of higher contribution from key contracts.
“We continue to see POSH as a name to ride the gradual offshore service sector upturn; its share price has historically been strongly correlated with oil prices, which are rising again,” says Sarkar.
“Additionally, we think the market has overlooked the fact that POSH made the largest impairments as a percentage of fleet assets over FY15/16 (at close to 32% of fleet value). Its equity base is thus more eroded, and price-to-book valuation looks inflated versus peers, but is not.”
As at 3.14pm, shares of PSH are trading half a cent higher at 33 cents, implying an estimated price-to-book value of 0.7 times in FY17.
