Pacific Radiance

Pacific Radiance: OSKDMG initiates at Buy, TP $1.30. Note that the well-managed OSV owner/operator with a sustainable growth plan. Vessel owner with an edge as it also manages the construction of most of its newbuilds at third-party shipyards, to lower its vessel acquisition cost. Upside potential from a bigger vessel acquisition pipeline as the demand for OSV is robust while newbuild prices are attractive due to excess capacity in Chinese yards. Even with its current USD380m for 19 vessels, net gearing is expected to remain stable at 0.7x over FY14-15F. Stock is valued at $1.30, based on a 12x FY14F P/E, between the 13.9x average P/E for small/mid-cap peers in cabotage-protected markets and the global peer average of 11.3x.