Net cash position builds
Price Target : S$ 0.60.
At a Glance
• 2Q11 results in line; interim DPS of 0.75 Scts declared (2Q10: nil).
• Strong operating cash flow and growing net cash position.
• New deliveries of AHTS to continue to cap upside to utilisation and day rates for next 12 months.
• Maintain HOLD, S$0.60 TP.
Comment on Results
2Q11 results in line. CHO posted 2Q11 revenue of US$16.9m (+4% y-o-y, +17% q-o-q). Excluding vessel disposal gains of US$1.0m, recurring income was within expectations at US$8.3m, down 16% y-o-y on higher operating expenses from an expanded vessel fleet. This, along with lower day rates for some vessels, led to weaker gross margins of 53.5% (-11.6ppt y-o-y, -2.4ppt q-o-q). CHO’s net cash position of US$21.3m continues to grow on strong operating cash flows. An interim DPS of 0.75 Scts has been declared (2Q10: nil).
Charter market outlook for AHTS remains muted. We believe utilisation and day rates for AHTS have generally bottomed. However, despite a pick up in activity levels experienced, the market is still absorbing new deliveries, which will cap upside to utilization and day rates in the near to mid term. We continue to expect recovery in utilisation rates from 2012 onwards, led by the midlarge AHTS category (>7,999bhp), which should provide the impetus for day rates to follow.
Catalysts lacking; maintain HOLD. Our projection for a 10% decline in FY11F earnings to US$33.5m is maintained. No change to our TP of S$0.60, based on 9x recurring FY11 PE. Maintain HOLD on limited catalysts and earnings visibility, despite undemanding valuations.
Source/转贴/Extract/: DBS Vickers Research