SINGAPORE (Feb 22): PACC Offshore Services Holdings (POSH) on Tuesday reported that 4Q17 losses has narrowed to US$193 million ($254 million) from US$345 million last year, on lower impairment and loss from joint ventures.
Revenue was 71% higher at US$62.7 million due to lower overseas and spot charters for harbour tugs, which brought gross profit to US$0.8 million, 87% higher y-o-y.
Group share of results from JVs also posted a smaller loss of US$9.7 million in 4Q17 compared to US$15.5 million in 4Q16. This was mainly due to higher impairment of vessels of US$15.5 million in 4Q17 compared to US$12.5 million in 4Q16 last year, offset by higher contribution from POSH Terasea.
See: POSH's 4Q net loss narrows but OSV market stays under pressure
Following the results announcement, DBS is maintaining its “buy” call on POSH with a lowered target price of 48 cents.
In a Thursday report, analyst Suvro Sarkar says that POSH Xanadu’s semi-submersible accommodation vessel (SSAV) securing a contract with Chevron starting in 1Q18 and the second SSAV Arcadia’s extension of its Prelude contract until 2Q18 were key positives this quarter, and point to healthy 1H18 gross profits from the accommodation segment.
With the contracts, both the group’s SSAVs will be working concurrently in the first 1Q and 2Q and the analyst reckons that the offshore accommodation (OA) segment will maintain its profitability on a gross level in 1H18.
Meanwhile, the group’s management seems to be more sanguine on workload potential from maintenance requirements in 2018, which could help buoy some of the smaller sub-segments such as the light construction vessels (LCVs).
Although the offshore support vessel (OSV) market has bottomed, Sarkar believes that POSH is well positioned to ride the gradual upswing.
“Additionally, we think the market has overlooked the fact that POSH made the largest impairments as a percentage of fleet assets over FY15-17 (about 44% of fleet value). Its equity base is thus more eroded, and P/BV valuation looks inflated versus peers, but is not,” says Sarkar.
In addition, POSH is a member of respected conglomerate Kuok Group, which the analyst believes will bring key advantages to the group, including ready access to affiliated shipyards of the Kuok Group, which enables POSH to achieve faster turnaround times for newbuilds and better manage maintenance and refurbishment costs; lower financing costs; and access to the Kuok Group’s global network and connections to open new markets and expand business.
“Despite a rise in net gearing to about 1.6 times owing to further impairments taken, POSH’s positive operating cash flow, strong parental backing by Kuok Group, lack of bonds outstanding, and undrawn bank facilities of about US$133m give us comfort; we see POSH as a name to ride the gradual OSV recovery,” says Sarkar.
As at 3.30pm, shares in POSH are trading at 38 cents or 1.2 FY18 book.
