TAS Offshore’s bottomline misses analyst target, remains confident of vessel demand

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KUCHING: TAS Offshore Bhd (TAS Offshore) unveiled figures for the first quarter of its financial year 2015 (1QFY15) which analysts say missed target on declining margins.

TAS Offshore’s 1QFY15 revenue of RM76.4 million was up 25 per cent quarter on quarter and 157 per cent year on year, coming in at 24 per cent of RHB Research Institute Sdn Bhd (RH’sB Research) full-year target.

“However, its core net profit of RM5.5 million only accounted for 18 per cent of our FY15 target,” the firm said in a note yesterday. “ Quarterly core net margin fell significantly to seven per cent (against 17 per cent seen in the corresponding period last year) despite the year on year topline surge.”

RHB Research believed the higher results were mainly attributed to increased sales recognition on four tugboats and an anchor handling tug supply (AHTS) vessel sold during the period under review.

To note, there was a reversal of a RM3.3 million impairment loss on trade receivables recognised in 1QFY14. Despite this, TAS Offshore remains optimistic of demand for its vessels to be strong, propelled by current crude oil prices.

“The current crude oil price of about US$85 per barrel will continue to spur oil majors to maintain the expenditures on exploration and particularly, production,” it said in its statement to Bursa Malaysia on October 21. Increasing in demand for modern jack-up rigs entering the market will result in needs for more offshore support vessels. Thus, we expect the demand for both platform support vessels and AHTS vessels to be strong.”

TAS Offshore remains optimistic in its outlook that new demand for offshore support vessels with higher technical specifications suitable for deep sea operation will grow and that demand for offshore support vessels for the Enhanced Oil Recovery projects – which allow optimum extraction of oil resources – will also help to support the new offshore support vessels market.

“Our order book remains healthy and we are optimistic of our prospect but will remain cautious in our business operation.”

RHB Research affirmed that it was gaining traction in its build-to-stock (BTS) model, recapping that TAS had entered into joint-venture (JV) agreement with China-based Chan Baihang in September to fund its BTS vessels.

The company said the BTS model requires intensive investments in capital and that the JV would allow TAS to achieve this objective while minimising the exposure risks in this operation.

Currently, TAS is building six more offshore support vessels (OSVs), which ought to be delivered by 2015. RHB Research pegged a target price of RM1.42 for the stock.