Compiled by Kenneth Lim
The Business Times
PACC OFFSHORE SERVICES HOLDINGS | BUY
TARGET PRICE: S$0.42
FEB 22 CLOSE: S$0.355
DBS GROUP RESEARCH, FEB 22
Sentiment for oil services stocks should improve as we see more evidence of an inflexion point in oil majors' capex plans. Some oil producers have already surprised on the upside (for example, ExxonMobil and CNOOC increasing 2017 capex by 14 per cent and 20-30 per cent year-on-year respectively).
A ramp-up in activity at cheaper onshore regions (for example, US shale) should lead the recovery, but we believe an offshore activity recovery is also showing green shoots.
We have seen the offshore working rig count increase in February 2017 for the first time since July 2014 (albeit only slightly).
Thus, despite a still-dismal Q4 2016, we expect a gradual earnings recovery in 2018.
With no bonds outstanding, positive operating cash flows and a proven ability to secure work for its vessels even during the downturn, we like PACC Offshore Services Holdings (POSH) as a beta play on the capex recovery.
In addition, POSH is among the potential privatisation candidates with high ownership of 81.89 per cent by majority shareholder, Kuok (Singapore).
PACC OFFSHORE SERVICES HOLDINGS | SELL
TARGET PRICE: S$0.33
FEB 22 CLOSE: S$0.355
OCBC INVESTMENT RESEARCH, FEB 22
PACC Offshore Services Holdings (POSH) reported a 49 per cent year-on-year drop in revenue to US$36.7 million and a net loss of US$345.4 million in Q4 2016, bringing full-year net loss to US$371.4 million.
Due to the impairments, the group's net gearing rose from 0.5 times in FY15 and 0.6 times in Q3 2016 to 1.0 time in FY16; we understand no bank covenants were breached in 2016.
Meanwhile, the group still has undrawn bank lines of about US$282.9 million in the form of revolving facilities.
Prior to this set of results, we had a fair value (FV) of S$0.30 based on 0.45 time FY17 forecast net tangible assets (NTA).
With the latest impairments, we increase our multiple to 0.7 time NTA, such that our FV rises to S$0.33.
With the downside of 10 per cent, we downgrade our rating to "sell".
AURIC PACIFIC GROUP | ADD
TARGET PRICE: S$1.96
FEB 22 CLOSE: S$1.655
CIMB RESEARCH, FEB 21
FY16 core net profit was in line, at 101 per cent of our forecast.
It surged 177 per cent year-on-year to S$19.3 million, driven by improved profitability of all business segments.
Net cash position strengthened to S$87.5 million, forming 42 per cent of market cap.
We remain upbeat on the group's FY17 earnings outlook.
Major shareholder's offer price of S$1.65 translates into 10.9 times FY16 core price-earnings ratio (or 6.3 times excluding net cash).