PACC Offshore Services Holdings Ltd. (POSH) reported a 1% YoY rise in revenue to US$55.8m but saw a net loss of US$10.0m in 4Q14, bringing full-year net profit to US$53.2m vs. US$73.4m in FY13. This was significantly below the street’s expectations (Bloomberg consensus: US$81.0m). Gross profit margin was only 11.6% in 4Q14, compared to 22.3% in 4Q13 and 25.9% in 3Q14, mainly due to poorer performance in the offshore support vessels segment as well as the transportation & installation segment. Looking ahead, it is uncertain when the second SSAV would secure a contract, and OSV charter rates are likely to be pressured. We update our estimates, and based on 8x FY15F EPS, we derive a fair value estimate of S$0.50 with a HOLD rating for POSH. Meanwhile, a 1.5 S cents dividend has been proposed for FY14.
FY14 results below street’s expectations
PACC Offshore Services Holdings Ltd. (POSH) reported a 1% YoY rise in revenue to US$55.8m but saw a net loss of US$10.0m in 4Q14, bringing full-year net profit to US$53.2m vs. US$73.4m in FY13. This was significantly below the street’s expectations (Bloomberg consensus: US$81.0m). Gross profit margin was only 11.6% in 4Q14, compared to 22.3% in 4Q13 and 25.9% in 3Q14, mainly due to poorer performance in the OSV segment as well as the transportation & installation segment. Losses at the JV level also pulled net profit down.
Updates on the two SSAVs
The first SSAV, POSH Xanadu, is undergoing inspections and trials in Brazil prior to deployment in 1Q15. It has been contracted to Petrobras for a 1+1 year contract worth US$80.5m for the first year. Efforts are underway to secure employment for the second SSAV, POSH Arcadia, which is scheduled for delivery in mid-2015. However, given the problems that Petrobras itself is facing, it is increasingly uncertain when the contract would be awarded.
Looking beyond Mexico
Meanwhile, PEMEX is also planning for capex reductions, and it is also unclear when POSH’s Mexico JVs will turn around. As such, it is not surprising that out of the nine Mexican flagged vessels in FY14, six have been reflagged in pursuit of international charters. Of the remaining three vessels, two are on charter and the last unit is under negotiation. POSH has been seeing losses for its share of JV line item since 4Q13, save for 2Q14.
HOLD with S$0.50 fair value
With the oil price volatility, POSH plans to focus on cost efficiency and maximise vessel utilisation. It has also deferred certain planned newbuildings; committed capex as of end FY14 approximates US$250m, of which US$130m is expected to be paid in FY15. Meanwhile, net gearing stands at a healthy 0.5x. Based on 8x FY15F EPS, we derive a fair value estimate of S$0.50 with a HOLD rating for POSH. A final 1.5 S cents dividend has also been proposed for FY14, representing a cash payout of 38%.
PACC Offshore Services Holdings Ltd. (POSH) reported a 1% YoY rise in revenue to US$55.8m but saw a net loss of US$10.0m in 4Q14, bringing full-year net profit to US$53.2m vs. US$73.4m in FY13. This was significantly below the street’s expectations (Bloomberg consensus: US$81.0m). Gross profit margin was only 11.6% in 4Q14, compared to 22.3% in 4Q13 and 25.9% in 3Q14, mainly due to poorer performance in the OSV segment as well as the transportation & installation segment. Losses at the JV level also pulled net profit down.
Updates on the two SSAVs
The first SSAV, POSH Xanadu, is undergoing inspections and trials in Brazil prior to deployment in 1Q15. It has been contracted to Petrobras for a 1+1 year contract worth US$80.5m for the first year. Efforts are underway to secure employment for the second SSAV, POSH Arcadia, which is scheduled for delivery in mid-2015. However, given the problems that Petrobras itself is facing, it is increasingly uncertain when the contract would be awarded.
Looking beyond Mexico
Meanwhile, PEMEX is also planning for capex reductions, and it is also unclear when POSH’s Mexico JVs will turn around. As such, it is not surprising that out of the nine Mexican flagged vessels in FY14, six have been reflagged in pursuit of international charters. Of the remaining three vessels, two are on charter and the last unit is under negotiation. POSH has been seeing losses for its share of JV line item since 4Q13, save for 2Q14.
HOLD with S$0.50 fair value
With the oil price volatility, POSH plans to focus on cost efficiency and maximise vessel utilisation. It has also deferred certain planned newbuildings; committed capex as of end FY14 approximates US$250m, of which US$130m is expected to be paid in FY15. Meanwhile, net gearing stands at a healthy 0.5x. Based on 8x FY15F EPS, we derive a fair value estimate of S$0.50 with a HOLD rating for POSH. A final 1.5 S cents dividend has also been proposed for FY14, representing a cash payout of 38%.
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