Mermaid Maritime

Mermaid Maritime: Mermaid Maritime increased its shareholding in Subtech Saudi Arabia from 70% to 95% for US$250k. The group's move to increase its business presence in Saudi Arabia follows state-owned Saudi Aramco's plans to increase investment over the next decade to keep oil production capacity steady, while doubling gas production. The subsea solutions provider currently services Saudi Aramco with a 5+2 year inspection, repair and maintenance services contract, while management intends to capitalize on the group's capex increase in offshore spending. Although the O&G industry faces an overhang currently due to the tumbling brent oil prices, which have now fallen 21% from its peak in Sep '13 to US$91.38/bbl, we reckon the oil prices would still make deepwater exploration and production (E&P) investment capex commercially viable versus production costs of USD56-65/bbl. As more offshore platforms and subsea pipelines and a bigger infrastructure will require more maintenance and subsea inspection, repair and maintenance work. This should benefit Mermaid Maritime. At $0.36, Mermaid Maritime trades at 8.7x forward earnings, in line with peers' average of 9x.