Pacific Radiance (PACRA SP: BUY) Price/Target: S$0.725/S$1.00 Analyst: Nancy Wei/Foo Zhi Wei (65-6590 6628)
4Q14 hit by poor DSV performance, as expected. Declares final DPS of 3 cts.
What's new?
* Results in line with our expectation. Pacific Radiance reported a net profit of US$69.4m (+22% yoy) for FY14, in line with our forecast of US$70m. Net profit for 4Q14 is US6.2m, down 63% YoY due to weak performance in the diving support vessel (DSV) division. We had earlier flagged this in our report dated 20 January. In 4Q14 DSV utilization was low for Pacific Radiance's 2 DSVs. Feedback from ship-brokers indicated the DSV market was hit by negative knee-jerk reaction of oil companies following the oil price collapse.
Our Take
* Maintain BUY and our target price. New DSV jobs were delayed. We expect a resumption of DSV tenders (shallow water) from 2Q15 onwards. Our target price of S$1.00 is based on 2016 PE of 7.0x. A final DPS has been declared. More details to follow after analyst briefing.
Crude snapped a seven month losing streak on Friday, supported by an improving demand outlook and supply outages.
Front-month March New York ultra-low sulfur diesel futures surged more than 7 percent intraday as March ULSD and RBOB rallied ahead of Friday contract expirations.
U.S. April crude settled up $1.59, or 3.3 percent, at $49.76 a barrel. The contract posted a 3 percent gain for the month of February, it's first monthly gain since June.
The U.S. crude contract's gains have been hemmed in by rising crude oil inventories in the United States, up 8.4 million barrels last week, according to government data.
Brent April crude was up $3.90 at $62.40 a barrel, on pace to post a 16 percent monthly gain, the first monthly rise since June.
Hopefully oil price continues to stregthen, then Pacific Radiance share price will rise. My prediction when Brent crude price hits $70, Pacific Radiance will hit 90 cents. When oils hit $80, then Pacific Radiance will break $1.
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