Pacific Radiance

UOBKayhian on 8 Jan 2014


FY13F PE (x): 7.6
FY14F PE (x): 8.5
Target price of S$1.19 is pegged at 2015F PE of 9.5x, in line with the long-term (2004-
current) 1-year forward PE mean of 9.5x for the OSV-owner segment. With the passing
of 2013, we are rolling forward our 12-month target prices for oilfield-service stocks. Our
PE valuations are now pegged at 2015 earnings as we expect 12-month target prices to
price in 2015 earnings projections. Pacific Radiance offers: a) an experienced industryveteran
management, b) strategic market positioning, and c) strong earnings growth, a
3-year EPS CAGR of 31%.

A virtuous-cycle OSV business. Pacific Radiance operates a virtuous-cycle business
with: a) a young, sought-after fleet, b) vessels acquired at a cost that is lower than openmarket
prices due to the group’s strong relationships with third-party OSV shipyards,
while procurement of vessel equipment for new vessels is controlled tightly through
direct purchases from suppliers, and c) strategic positioning in high-growth subsea
services and high-barriers-to-entry cabotage oil & gas (O&G) markets such as Indonesia,
Malaysia and South America. Indonesia is expected to see the biggest increase (+172%)
in O&G spending in Asia in 2013-17 while Malaysia is the largest spender with US$24b.
Separately, spending on subsea services is forecast to increase by 335% in 2013-17.