Significant long term contract secured for new vessel.
Pacific Radiance announced that it has secured a charter contract worth up to US$100m for its latest Maintenance Work Vessel (MWV), which is the first of 14 new vessels scheduled to enter its fleet in FY14. The contract signed with an international oil major is for a term of up to 7 years, including extensions, and will be deployed to provide maintenance services for a project in SE Asia starting from 2Q14. To recall, the MWV has an accommodation capacity for 208 men and is equipped with a 64-tonne crane. Armed with Dynamic Positioning Class 2 (DP 2) capability, it is also able to operate in deeper waters.
Day rate higher than expected. The implied daily charter rate for the contract works out to be about US$39,000 per day, which is higher than our existing assumption of US$30,000 per day, and signals the strength of the offshore accommodation and inspection, repair, maintenance market in Asia. Our utilisation assumption for the Group’s accommodation work boat/ maintenance work vessel segment is also conservative at 60% in FY14/15F, and thus, this contract demonstrates that Pacific Radiance can potentially execute better than our existing assumptions.
On track to strong growth.
The Group will be taking delivery of a further 13 vessels in
FY14 and 5 in FY15, which will drive near term growth. Pacific Radiance remains one of our top picks in the oil & gas services space, given a strong 29% growth profile over FY13-15 from its core chartering business, and upside potential from rising OSV day rates, plus exposure to the high growth subsea market and protected (cabotage) markets of Indonesia and Malaysia. We believe management is currently positioning for the next set of newbuild orders for delivery in 2016 and beyond, as the Group seeks to further rejuvenate and scale up its existing fleet. Maintain BUY with TP S$1.20.
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