Excerpts from analysts' reports
CIMB initiates coverage of Pacific Radiance with $1.73 target price
Analyst: Yeo Zhi Bin
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These are exciting times for PACRA, Singapore’s fastest growing OSV charterer. We expect the group to double its wholly-owned fleet of 24 dynamic-positioned offshore vessels with the addition of 25 net units by 2016. In turn, this would propel a 3-year core EPS CAGR of 29% over 2013-16, which we see as the rapid growth cycle for the company.
We initiate coverage on PACRA with an Add and target price of S$1.73, based on 9x CY16 P/E (peers’ average). Our FY14-16 EPS forecasts are 10-16% higher than the consensus but we still see upside. Re-rating catalysts could come from: 1) stronger margins as the group reaps economies of scale, 2) faster fleet expansion, and 3) stronger growth from its JVs and associated companies.
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Pang Yoke Min, executive chairman of Pacific Radiance. Photo: CompanyHelmed by veterans and decked by sprightly hands Established in 2002, PACRA is steered by an experienced trio of industry veterans. Undoubtedly, the most famous of this trio is Executive Chairman Mr Pang Yoke Min. Mr Pang was one of the founders of Jaya Holdings and was instrumental in growing that company into one of Singapore’s largest OSV builders.
What is refreshing is that PACRA is blooding new talent among its mid to senior ranks.
The group also owns and operates a modern and diverse fleet that supports the full spectrum of the oil & gas project life cycle. We read PACRA’s fleet diversity as management’s ability to keep its ears close to the ground. Ultimately, PACRA aims to grow its fleet of 56 wholly-owned vessels to 100 by 2019.
Expertise in shipbuilding management
While PACRA outsources its newbuild programme to third-party yards providing it scalability and flexibility, it also directly supervises the shipbuilding process to ensure that its requirements are met and the vessels are being built on-time and on-budget (or at even lower costs). Additionally, it has consistently strengthened its in-house supply chain for increased cost effectiveness and faster turnaround time.
Access to high-growth, protected markets
Underpinned by an expanding fleet, PACRA is increasing its geographical reach and penetrating into high-growth but protected markets through JVs or minority stakes in reputable local companies. Through these means, PACRA is able to take advantage of a lack of locally-flagged vessels and heightened E&P activities in these countries. It also works synergistically with its partners whereby its partners would acquire vessels from its existing fleet on a needs basis.
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