Pacific Radiance

UOBKyahian on 12 Dec 2014

FY14F PE (x): 5.4
FY15F PE (x): 4.8
Opportunity vs catching falling knives. The OPEC appears to be supportive of Brent oil
price at US$60-70/bbl for a while in order to have stability in the years ahead at
US$80+/bbl. The short-term weak oil prices should flush out high-cost oil production and
thus return the oil market to an even demand-supply keel. The OPEC’s median
budgetary breakeven is about US$100/bbl. Nonetheless, the market is fearful oil prices
could overshoot and continue to fall, with stock prices falling in tandem. Investors are
aware of a compelling investment opportunity, but at the same time are fearful of
catching falling knives.
We have not revised our earnings forecasts. Our channel checks suggest different
companies are seeing different impact. Efficient and shrewd operators are the least
impacted while selected shipbrokers are forecasting an average 10-15% reduction in
Asia’s vessel charter rates over the next 1-2 years.
Maintain BUY and target price of S$1.57, which is pegged to the OSV-owner segment’s
long-term 1-year forward PE mean of 9.5x.