PACC Offshore

PACC Offshore: 3Q14 results were below expectations, as net profit slumped 30% y/y to US$14.6m, due to a US$5m loss in its Mexican JV, GOSH, where seven vessels remained idle. Revenue crept up to US$67m, boosted by the offshore supply vessels segment (+8.1%), but offset by weaker contribution from the transportation & installation (-10.5%) and offshore accommodation (-3.1%) segments. Gross margins were weaker at 25.9% (2Q14: 30.1%, 3Q13: 41.1%), due to lower utilisation as some vessels underwent repair or were off-hired. Bottom line would have been worse, if not for a vessel sale gain of US$11.6m. For 9M14, net profit of US$63.2m (-9%) and revenue of US$178.2m (-2%) accounted for 76% and 71% of the street's full year estimates. Management notes that following the downtrend in crude oil price, oil majors may shift capex from exploration towards production and maintenance- leading to increased demand for its vessels. Nevertheless, Maybank-KE lowers FY14-16e EPS by 7%-11% to account for more conservative day rates and utilisation. While the house maintains its Buy rating, TP is lowered to $1.12 (from $1.26), and could be revised further pending sector review. At $0.665, PACC trades at 11.1x forward earnings and 0.76x P/B.