Vallianz

Vallianz: 1Q15 net profit edged up 5% y/y to US$5m, despite a 119% surge in revenue to US$60.7m from increased offshore support vessel chartering operations and new revenue streams from newly-acquired subsidiaries.

The new subsidiaries include shipbuilding and engineering group Jetlee, manpower services provider OER Group, as well as shipyard operator Newcruz Group, which were all funded by new shares in 4Q14.

Charter and brokerage services accounted for 63% of overall sales, compared to 89% in 1Q2014. Accordingly, gross margin contracted 10.9 ppts to 26.4% on a change in revenue mix.

Bottom line was significantly dragged by a spike in finance costs to $6.6m (+197%) due to increased interest expenses arising from its high net gearing of 2.18x (4Q14: 2.16x), partially mitigated by maiden contributions from 49%-owned Indonesian associate (US$1m) acquired in Dec '14.

Notably, finance costs constituted a staggering 41% of gross profit, putting the group at risk of a protracted oil price slump, which may severely impact its earnings.

According to management, the group is relatively sheltered given its focus on shallow water oilfield activities, which are less susceptible to capex reductions of the oil companies.

So far, the drastic cuts in capex by upstream industry players have led to the dearth of new orders for offshore companies at the lower end of the supply chain, and margins are expected to narrow as projects up for tender see more aggressive bidding.

As at 31 Mar, Vallianz' chartering services order book stood at US$461.6m.

At $0.061, Vallianz is valued at 5.4x trailing P/E and 0.72x P/B.