Pacific Radiance

Pacific Radiance (PACRA): Daiwa has an unrated report on the counter, following their recent meeting with the company. The group is PACRA is working with a number of Chinese yards for its newbuild programme. While it has said that the construction of these new vessels will take place at third-party yard facilities, PACRA’s own design and project management teams will oversee the construction process closely. Management believes this will enable the company to customise its vessels at a low cost and will help to ensure the quality of the vessels matches its requirements. Also, PACRA’s long-standing relationships with its Chinese yard partners have helped it secure more favourable down-payment terms for newbuilds. Besides its core offshore support services segment, PACRA is also building a ship repair yard that it expects to complete in 2H15. Management believes this new yard will enable PACRA to carry out a wider range of ship-repair activities and give the company better control to do repair and maintenance work on its own fleet. PACRA also plans to utilise the new yard to take on repair and modification contracts for thirdpart vessels, which it believes could potentially yield good profit margins. PACRA trades at a 2014E PER of 9.8x (based on the Bloomberg consensus EPS), which compares with an average 1-year forward PER of 9.2x for the Singapore-listed offshore and marine players (on the Bloomberg consensus EPS forecasts).