PACC Offshore

PACC Offshore: 1Q15 results were off track . Net profit crashed to almost breakeven at US$0.02m from US$36.7m in !Q14, largely due to the absence of gain of sale from five vessels (US$25.9m) booked in the previous year. This compares to Maybank-KE's FY15 profit estimates of US$70.7m and street forecast of US$98m.

Revenue rose 9% y/y to US$57.6m, mainly lifted by the OSV (+13%) and offshore accommodation (+208%) segments, but weighed by weaker transportation & installation (-55%) and harbour services & emergency response (-10%) units.

Overall gross margin dived to 13.9% from 30%, as charter and utilisation rates continue to come under pressure across most segments. The exception was the offshore accommodation (OA) segment, which commenced the charter of POSH Xanadu and POSH Endurance.

Bottom-line was further dragged by a 59% drop in JV contributions to US$1.3m, due to losses incurred in Mexico from vessels prior to their ownership transfer to the group subsidiaries.

Going forward, management guides that oil price continues to remain weak and consequently, the group does not expect any significant demand turnaround from offshore oilfield development activities. This will continue to put pressure on rates and utilisation.

Maybank-KE is maintaining its Buy with TP of $0.65 based on its depressed 0.5x P/B valuation and longer-term prospects. The house is guiding for a stronger 2H15, with US$140m worth of new charters expected to contribute from 2Q15, and a significant boost from the OA segment.