PACC offshore

PACC offshore: 1Q14 net profit jumped 76% to $36.7m despite revenue declining 6% to $52.9m, as bottom-line was aided by recognition gains on the sale of vessels. The decline in revenue was due to lower utilisation from the Transportation and Installation (T&I) and Offshore Accommodation (OA) segments, coupled with revenue being recognised by JVs resulting from the transfer of vessels to JVs. This was partially offset by higher revenue registered from the Offshore Supply Vessels (OSV) segment arising from deployment of four new Platform Supply Vessels (PSVs) and one AHTS. Gross margins improved to 29.9% from 21.8% due mainly to decrease in project costs as a result of fewer lump sum projects in the T&I segment. With some vessels being transferred to JVs, their corresponding costs are now recognised by the JVs. Bottom-line was also boosted by a 138% rise in other operating income to $35.8m due mainly to recognition of gain on sale of 5 vessels upon completion to a JV. Going forward, PACC remains positive on its prospects noting that with oil prices still at robust levels and expected to stay elevated in the longer term, there will be continued spending on exploration and production activities, which will translate into increased drilling operations and maintenance activities which require the services of offshore support vessels. The Group has also expanded into the deepwater offshore accommodation market, and recently announced a one-year contract worth ~$80.5m to charter its Semi-Sub Accommodation Vessel (SSAV), the POSH XANADU, currently under construction, to Petrobras in Dec ‘14. The contract has an option to extend for another year and if extended, total contract value will be in excess of US$144m. POSH currently trades at 16.8x forward earnings and 1.5x P/B versus its Asian peers average of 12.1x forward earnings and 1.5x P/B. Latest broker ratings as follow: DBSV initiates coverage with Buy call and TP $1.36