SINGAPORE (March 2): DBS Vickers is maintaining its “buy” call on Mermaid Maritime with a price target of 25 cents as the latter enjoys a more favourable risk-reward profile compared to industry peers.
(See also: The seas have calmed for Mermaid Maritime)
In a Thursday report, DBS analyst Suvro Sarkar says the provider of drilling and subsea engineering services is expected to remain profitable given robust FY16 earnings despite the industry downcycle.
Mermaid generated US$49 million ($69 million) positive operating cashflow in FY16. These came on the back of cost reductions and renewals of contracts for all three jack-up rigs under associate AOD III.
Core net profit of US$17.1 million also came in slightly above initial estimates, thanks to the cost savings and higher than expected associate income in 4Q16.
Despite lower fleet utilisation, Mermaid’s subsea division also reported an operating profit of US$5.9 million in FY16 compared to an operating loss of US$14 million in FY15.
Associate income came in at US$1.8 million in 4Q16, down slightly from 3Q16 levels.
These positives, plus the probability of privatisation of Mermaid by parent Thoresen Thai, provide further upside potential, says Sarkar.
Shares of Mermaid Maritime are up 10% at 22 cents.
