Wednesday, 16 July 2014

Updates of Oil and Gas / Offshore and Marine Stocks

It is a grueling week for me as I battled sickness, together with overseas visitors here. To make matters worse, my daughter has high fever today was rush to see the doctor. Despite the hectic schedule, I feel obligated to write a blogpost today, as my postings for the past two weeks had been going slow. Since there are many interesting announcements and analysts reports on Offshore & Marine companies lately, I decide to compile some of them as follows.



16/7: Viking Offshore - Wins US$32m charter contract for Land Drilling system

Viking Offshore & Marine Limited has secured a 50-month bareboat charter for a land rig system worth approximately US$32 million. Under the contract, Viking’s wholly owned subsidiary Viking Asset Management Pte Ltd (VAM) will buy and leaseback the newbuild 1,500 horsepower train-type land rig and related drilling equipment system to a Chinese land rig specialist from September 2014. VAM expects charter income from this transaction to have a material contribution to its bottom line for the financial year ending 31 December 2014. Apart from the land drilling rig, Viking is also in joint venture with the Labroy Marine founders to own two CJ46 offshore jack-up drilling rigs which are expected to be completed within the fourth quarter of 2015.
Read full announcement here.
Source: Viking Offshore and Marine Limited Website.

15/7: Ezion - USD268.6m contract wins

Ezion has announced two contract wins worth a total of USD268.6m. The first contract is a 7-year contract worth US$122.6 mn (translates to day rate of ~48,000) to support east European NOC in North Sea and to be deployed by 2Q15. The  2nd  contract  is  a  5-year  contract  worth  US$146  mn (translates to day rate of ~80,000) to support South East Asian NOC in SE-Asian waters and to be deployed by 3Q16. JP Morgan remains Overweight on Ezion because they expect strong liftboat demand due to aging platforms and increasing offshore construction activity. Ezion’s liftboat fleet is backed by bareboat charters worth more than US$1bn that is set to see nearly 70% earnings growth into 2014, based on estimates. Among asset owners in Singapore, Ezion stands out as one of the cheapest stocks, in JP's view, at a FY14E P/E of 10.5x. TP = S$2.75.
Read full report here.
Source: JP Morgan Asia Pacific Research, Ajay M
  
15/7: Otto Marine - Secured approx. US$404 million charter contracts in 1H2014

Otto Marine Limited, announce that the Group has secured charter contracts worth approximately US$404 million in the 1H2014. With global offshore support vessels (OSVs) footprint across Africa, Asia, Australia, India, the U.S., the Gulf of Mexico and the North Sea, Otto Marine takes advantage of its strong complementary shipyard to achieve economies of scale, supporting its very own fleet renewal, expansion and upgrading program to ride on the increasing demand for OSVs. Otto Marine enjoys a healthy order book that stood at approximately US$450 million as at 30 June 2014, with an average contract tenor of 3 to 5 years. Ultimately, the booming E&P activities, along with the rising OSV demand will enhance the supply-demand dynamics, which is expected to drive up the charter rates. Moving forward, Otto Marine’s primary focus will be placed upon capitalizing on its high growth in markets such as North Sea, Africa and Australasia as well as penetrating into cabotage-protected areas to increase its presence in high-potential regions in Malaysia and Indonesia via key partnership with the GO Marine Group.
Read full announcement here.
Source: Otto Marine Limited Website.

15/7: Ezion - Clearing the air on Credit Suisse Report

Credit Suisse issue a report on 9 July titled “A service rig is not a liftboat” and gave Ezion an UNDERPERFORM rating and a target price of S$1.80.
Read report here.
Source: Credit Suisse Research, Gerald Wong

A week later, DMG/OSK Research Analyst Lee Yue Jer come out to clear the air on some of the factual inaccuracies of Credit Suisse Report to upgrade Ezion ratings to TOP Buy.
Read report here.
Source : DMG/OSK Research, Lee Yue Jer

14/7: Ezra - To sell its EMAS Marine unit to EOC for USD520m

Ezra plans to sell its EMAS Marine unit to EOC for USD520m, including USD150m in cash and USD370m in shares of EOC via issuing 280.1m new EOC shares at approximately NOK8.18 per share. By contrast, EOC’s shares are currently trading at NOK5.94 in Oslo. EOC is also considering a potential secondary listing in Singapore to fund the cash consideration. Ezra is contemplating undertaking a secondary sale of its EOC stake of up to USD20m in the Norwegian market directed at existing EOC shareholders at the same price as the proposed offering. The consolidation would make EOC the largest OSV provider by asset size in Asia and also allow Ezra to focus its attention on its fast-growing Subsea Services division, leaving the offshore services business to EOC and the engineering & fabrication business to Triyards Holdings. TP for Ezra = S$1.25.
Read full report here.
Source : DMG/OSK Research, Lee Yue Jer

14/7: Nam Cheong – Optimism reinforced; reiterate BUY TP 0.55

Nam Cheong should benefit disproportionately from a recovering OSV market, due to an added support from the Malaysian OSV operators, which are profiting from Petronas’s spending push. In our recent conversation, management continues to exude confidence in vessel sales for the next two years, reinforcing our positive view. We believe that it would maintain its track record of selling all its build-to-stock vessels before delivery. Other than the option for two additional AWBs from Perdana Petroleum, there is no factored in of any future BTO contracts, suggesting room for earnings upside. EPS is raised by 23-26% over FY15E-16E on positive vessel sales and contract win outlook. TP = SGD0.55 after ascribing a higher FY15E P/BV of 2.2x (previously 1.9x). In Maybank's view, a higher multiple is warranted given its better ROE profile (20% assumed sustainable ROE vs. 17% previously) post our earnings upgrades.
Read full report here.
Source: Maybank Kim Eng, Yeak Chee Keong

9/7: Kim Heng – Seeking to Grow

1) Long-time player in the O&M industry. 2) Core business delivers good returns. 3) Seeking next leg of growth. 4) Under-priced; initiate with BUY. OCBC value Kim Heng based on 11.5x FY14/15F P/E, close to the industry average for offshore service providers. The group’s proven track record and established relationships with clients lends confidence that it can weather downturns and be a beneficiary during up-cycles. The current outlook for the O&M industry is also positive, and well-executed acquisitions may result in a re-rating of the stock. Initiate with BUY TP = S$0.34 fair value estimate. 
Read full report here.
Source: OCBC Investment Research, Low Pei Han


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