Mermaid

Mermaid: Maybank-KE downgrades Mermaid Maritime to Hold.

Net profit for 5QFY14 (reporting year end changed from September to December) totalled US$4.3m (-67.1% y/y) missed market expectations on weak chartered-in vessel utilisation, project delays and dry-docking.

Of its two main chartered-in tender rigs, MTR-1 remained on standby throughout the quarter, MTR-2 had its contract terminated early in December 2014 and is yet deployed. The higher-end DP2 DSV has been chartered in for Indonesian work but is unable to secure jobs.

In FY15, profitability may be threatened as its stability questioned and margins squeezed. Fortunately, its extremely low net gearing of 0.04x should help it ride the commodities down turn.

The house cuts FY15E-16E EPS and switches to P/B valuation due to EPS forecast risks. TP drops to $0.24 (from $0.42).