- FY9/14 PATMI in line. Associate AOD the main booster. First & final dividend of 0.47 USD ct.
- Stable subsea demand with USD470m backlog.
- Maintain BUY & SGD0.42 TP, at 9x FY9/15E EPS. Catalysts from delivery and utilisation of new assets in 2016.
4Q14 PATMI of USD13.8m (-15.1% YoY, +6.4% QoQ) met consensus and our expectations. FY9/14 PATMI rose 187% YoY to USD45.2m forming 99% of both forecasts. Gross profit of USD57.5m was 13.5% higher YoY on the execution of more projects and higher vessel utilisation. Its 33.8%-owned associate, Asia Offshore Drilling (AOD) contributed USD31.1m (FY9/13: USD4.4m) or 79% to earnings. AOD has three jackup rigs working for Saudi Aramco for 3+1 years starting mid-2013 at lucrative day rates of USD180k/day. Operating cash flow was stable at USD28.9m vs USD25.0m a year ago.
Stable subsea exposure, long-term catalysts intact
Mermaid’s exposure to shallow waters and production phases provides some insulation against oil-price volatility. It recently had to charter in three more vessels to fulfil short-term subsea contracts, a sign of enduring demand for its services. It also chartered in an Indonesian-flagged DP2 dive support vessel (exWindermere) for five years for potential IRM work in cabotageprotected Indonesia. To us, this demonstrates its confidence in the market. A subsea order book of USD470m offers good coverage for FY9/15. Mermaid’s longer-term catalysts should come from the delivery and utilisation of two tender rigs and a DSV in 2016, allowing it to scale up further.
Our forecasts are largely intact and we introduce FY9/17E.
Maintain BUY and SGD0.42 TP, at 9x FY9/15E EPS. This is on par with what we assign to well-positioned asset owners, Ezion (BUY, TP SGD1.93), POSH (BUY, TP SGD0.92) and Pacific Radiance (BUY, TP SGD1.33).
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