Pacc Offshore Services Holdings (POSH) reported a 22% YoY rise in revenue to US$71.0m but saw a 49% drop in net profit to US$6.1m in 2Q15, due to a lower gross profit margin of 20.4% vs. 30.1% in 2Q14, as well as lower vessel disposal gains. Still, we estimate core net profit fell by about 43% YoY in the quarter to ~US$5.5m. 2Q15 was supported by the Offshore Accommodation segment, which is likely to remain the bright spot. However, this may be insufficient to support our already below-consensus earnings estimates, especially since for the OSV and T&I segments, pressure on charter rates is likely to continue. Crude oil prices have fallen further recently, and with the lower valuations that offshore & marine plays are trading at, we decrease our P/E from 8x to 7x blended FY15/16 earnings. We also tweak our earnings estimates lower, and such that our fair value estimate drops from S$0.44 to S$0.33. Downgrade to SELL.
US$6.1m net profit in 2Q15
Pacc Offshore Services Holdings (POSH) reported a 22% YoY rise in revenue to US$71.0m but saw a 49% drop in net profit to US$6.1m in 2Q15, due to a lower gross profit margin of 20.4% vs. 30.1% in 2Q14, as well as lower vessel disposal gains. Still, we estimate core net profit fell by about 43% YoY in the quarter to ~US$5.5m. The group’s share of JV profits was US$3.3m in 2Q15, turning around from 1Q15’s loss of US$1.3m. This was mainly due to higher contributions from POSH Terasea.
Offshore accommodation supports 2Q15 earnings
POSH Xanadu had its maiden full quarter contribution in 2Q15 (100% uptime operational performance in Brazil), and along with the deployment of POSH Endurance (238-pax LCV), the Offshore Accommodation (OA) segment saw its revenue rise from S$13.1m in 1Q15 to S$26.3m in 2Q15. Gross profit in this segment also increased from S$1.6m in 1Q15 to S$13.1m in 2Q15. In comparison, the Offshore Supply Vessels (OSV), Transport & Installation (T&I) and Harbour Services and Emergency Response (HSER) segments had gross profits ranging from –S$0.7m to S$1.7m.
Downgrade to SELL
Looking ahead, POSH Enterprise (3rd LCV to join the OA fleet) will commence its maiden long-term charter in the Middle East in 2H15 for 5+2 years. As for POSH Arcadia (2nd SSAV), it is scheduled for delivery by the end of this year. However, these may not be enough to support our earnings estimates, especially since for the OSV and T&I segments, pressure on charter rates is likely to continue, given the oversupply of vessels. Crude oil prices have fallen further recently, and with the lower valuations that offshore & marine plays are trading at, we decrease our P/E from 8x to 7x blended FY15/16 earnings. We also tweak our earnings estimates lower, and such that our fair value estimate drops from S$0.44 to S$0.33. Downgrade to SELL.
Pacc Offshore Services Holdings (POSH) reported a 22% YoY rise in revenue to US$71.0m but saw a 49% drop in net profit to US$6.1m in 2Q15, due to a lower gross profit margin of 20.4% vs. 30.1% in 2Q14, as well as lower vessel disposal gains. Still, we estimate core net profit fell by about 43% YoY in the quarter to ~US$5.5m. The group’s share of JV profits was US$3.3m in 2Q15, turning around from 1Q15’s loss of US$1.3m. This was mainly due to higher contributions from POSH Terasea.
Offshore accommodation supports 2Q15 earnings
POSH Xanadu had its maiden full quarter contribution in 2Q15 (100% uptime operational performance in Brazil), and along with the deployment of POSH Endurance (238-pax LCV), the Offshore Accommodation (OA) segment saw its revenue rise from S$13.1m in 1Q15 to S$26.3m in 2Q15. Gross profit in this segment also increased from S$1.6m in 1Q15 to S$13.1m in 2Q15. In comparison, the Offshore Supply Vessels (OSV), Transport & Installation (T&I) and Harbour Services and Emergency Response (HSER) segments had gross profits ranging from –S$0.7m to S$1.7m.
Downgrade to SELL
Looking ahead, POSH Enterprise (3rd LCV to join the OA fleet) will commence its maiden long-term charter in the Middle East in 2H15 for 5+2 years. As for POSH Arcadia (2nd SSAV), it is scheduled for delivery by the end of this year. However, these may not be enough to support our earnings estimates, especially since for the OSV and T&I segments, pressure on charter rates is likely to continue, given the oversupply of vessels. Crude oil prices have fallen further recently, and with the lower valuations that offshore & marine plays are trading at, we decrease our P/E from 8x to 7x blended FY15/16 earnings. We also tweak our earnings estimates lower, and such that our fair value estimate drops from S$0.44 to S$0.33. Downgrade to SELL.
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