PACC Offshore Services Holdings Ltd - Mixed bag 2Q15 as solid accommodation performance offset by loss making OSV division


Mixed bag 2Q15 as solid accommodation performance due to SSAV (Xanadu) and LCV (Endurance) offset by loss-making OSVs: POSH reported a headline net income of US$6.1 million, down 49% y/y. However, it was a strong recovery from 1Q15, which saw nearly zero profit. On an adjusted basis (ex-asset sale gains) earnings came in at US$5.5 million. Earnings would have been stronger had there not been a US$2.7 million allowance for doubtful debt. Overall, 1H15 recurring earnings came in at US$4.3 million, which is only 15% of JPM’s FY15E earnings but do note we are 50% below consensus currently.

Loss making Offshore support division a key area of concern:
In spite of relatively steady revenue contributions from the OSV division (was only down 5% y/y and down 3.7% q/q), we saw OSV gross profit margins in negative territory versus 30% in 2Q14 and 12% in 1Q15. With Utilization at 79% in 2Q15 for the OSV division, we await further clarity from management on exact reasons for the loss i.e. have there been any one-off losses or costs.

Offshore Accommodation (OA) see solid earnings on 2 x new vessels:
With POSH Xanadu (SSAV deployed in Brazil) and POSH Endurance (LCV in SE-Asia) contributing for 2Q15, the OA division was one of the few bright spots for POSH as G.P. margins for 2Q15 (for OA) came in at 50% (1H15 at 37%) versus the JPM estimate of 34% providing upside risk. Admittedly though, we believe this is more than offset by the poor performance of HSER and OSV division and see overall earnings as unaffected.

Technical Analysis
Daily Chart
Reiterate Neutral, analyst briefing later today:
Given continued uncertainty on Oil services space, we continue to reiterate Neutral recommendation on PACC Offshore. (Read Report)

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Source : JP Morgan Asia Pacific Equity Research

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