PACC Offshore

PACC Offshore (POSH) clinched charters for eight OSVs with combined value of US$167.5m for a Middle Eastern national oil company.

Of the eight, six will be newbuild vessels, and all of them will have a firm five-year charter period with two-year extension options. The charters will commence progressively starting from Dec 2016.

As no further details are provided on the vessels, impact to the group's bottom line is currently unknown. Maybank KE believes the secured rates would likely be at least 20-30% off their peak rates before the oil price downturn, but still, these contracts would help in keeping utilisation rates up.

Comparatively, in 4Q15, POSH's OSV utilisation was ~67%, versus Pacific Radiance's 30%. Maybank KE believes the ability of POSH to land these contracts is impressive and suggests that clients are probably confident that POSH is an operator that can execute and will survive the downturn (thus the 5-year contracts).

The key investment thesis for POSH is that it has the least balance sheet risk among oil services players under coverage, with FY15 net gearing of 0.5x and $1b of loan facilities at an interest rate of <2%, where US$462m of loans have tenures of 5-7 years.

Maybank KE has a Buy on POSH with TP of $0.42.