Mermaid

Mermaid: Chalked in a strong FY13 performance which was above estimates, as full year net profit came in at US$15.7m (+389%) and revenue at US$269.6m (+47%), with bottom-line buoyed partly by a 45% drop in finance costs to $5.0m and a US$4.4m (FY12: -US$0.3m) contribution from associates. The strong top line was buoyed by Mermaid Offshore Services (MOS) which reported revenue of US$121.2m (+20%), as more subsea services was performed, while Subtech saw revenue at US$117.9m (+173%) primarily due to its Saudi Armaco diving services contract. Mermaid Drilling was the drag, reporting revenue of US$23.6m (-33%), as MTR-2’s utilisation rate was only 43.3% in FY2013, as it was back on-hire on 29 May13 after its special purpose survey. The strong associate contribution was a result of AOD I and AOD II which commenced work on 1 May13 and 13 July13, respectively. The sharp decrease in finance costs was due to the cancellation of a currency swap in last year and a lower average LIBOR in FY13. Going forward, Mermaid notes that the Group is experiencing greater demand for its subsea vessels and related services as evidenced by higher number of contract awards secured, and remains cautiously optimistic on the outlook of the offshore O&G sector, given the stable oil price and continued spending by O&G companies. For tender rigs, add that overall demand for jack-ups has improved globally, particularly in Asia and the Middle East. Positive contributions from Asia Offshore Drilling have begun as all its three jack-up rigs are fully employed each on a 3+1 year drilling contract in the Middle East. At the current price, Mermad trades at 16x FY13 P/E versus its Singapore peer average of between 7.5x to 25.7x. The group has proposed a dividend of US$0.0086, representing a yield of ~2.7%. Latest broker ratings as follow: CIMB maintains O/p and ups TP to $0.51