Mermaid

Mermaid: Unveiled another set of robust which surpassed bullish estimates, as 1QFY14 net profit surged to US$13.2m versus a net loss of US$0.1m, led by a 58% jump in revenue to US$83.8m. The stellar topline was led by a sharp spike in service income from the Subsea Group (+71%) and Drilling Group (+25%), partially offset by a slight US$0.2m decrease in service income by the Surveys Group. The outperformance of the Subsea Group which reported service income of US$64m was primarily driven by the Saudi Armaco diving services contract (revenue of US$24m), while vessel utilisation rate for the quarter was at 85.9% versus 50.6% in 1QFY13. Meanwhile Dilling Group’s service income at US$8.8m was led by tender rig, MTR-2 which saw 100% utilisation rate during the quarter and with MTR-1 was on standby, versus MTR-1 which achieved 100% utilisation and MTR-2 which achieved 45.4% utilisation in 1QFY13. Bottom-line was further propelled by associate contributions of US$7.1m (1QFY13: -US$0.4m), following contributions by jack-up rigs AOD I and AOD II, while AOD III went on contract from 10'th Oct'13. Going forward, the group is positive on its outlook, citing a buoyant outlook in the offshore O&G industries and improved demand globally for both tender and jack-up rigs. FY14 results is expected to see earnings bolstered by an Orderbook worth a~US$600-650m, and an expected spike in full year contributions from its associates (three jack-up drilling rigs) which have all been fully employed in the Middle East. To re-highlight, investors interests on Mermaid has been mounting, after the counter saw four initiation coverage reports over the past two months, while Maybank-KE had tipped Mermaid as its top small-cap pick within the oil and gas sector for 2014 At current price, Mermaid trades at an annualized 11x FY1Q14 P/E and 1.08x P/B which is in-line with its peers average. Latest broker ratings as follows: Maybank-KE maintains Buy and raise TP to $0.67 (prev. $0.61) CIMB maintains Add and raise TP to $0.59 (prev. $0.51)