STI : 3,220.92
Price Target : 12-month S$ 0.90 (Prev S$ 0.85)
Charter backlog improving
• Fleet utilisation rate of 91% in 4Q and higher charter rates provide evidence of better execution
• Vessel disposal gains of US$20m supported the 157% growth in recurring net profit for FY13 to US$49m
• Final DPS of 3.5cts translates to an attractive yield of 5.6%
• BUY, TP raised to S$0.90, stock is undervalued at 0.7xP/B, PE of 9x.
Encouraging signs. 4QFYJune13’s net profit of US$26.1m was in line with expectations, as earnings were boosted by disposal gains of about US$20m. In fact, results from the core chartering division would have been better than expected, if not for significant reconfiguration costs for some vessels under construction. Average fleet utilisation jumped to 91% during the quarter, compared to 64% in a weak 3Q, which resulted in 20% q-o-q growth in revenue and boosted chartering gross margins to 40% from 22% in 3Q13 and 35% in 4Q12. With the addition of more complex vessels in the fleet, and more time-charter contracts, average charter rate moved up to US$13,624/day in FY13, compared to US$10,485/day in FY12.
Improving visibility. After the disposal of 2 vessels in 4Q and the delivery of PSV Jaya Valour in July, Jaya currently has a 27-vessel charter fleet. Of the 8 vessels remaining in its legacy shipbuilding program, another 5 will be delivered in FY14, of which the 16,000bhp ice-class AHTS Jaya Sovereign has already been sold. In the past few months, the group has secured several significant charter contracts including 3 new PSVs and 1 multi-purpose maintenance work vessel, which has boosted the charter backlog to US$255m, securing revenue expectations for more than 2 years. The group is also reconfiguring 3 of the hulls under construction to higher specifications to ensure better charter rates going forward, but their delivery timelines have been pushed back beyond FY15.
Maintain BUY. Factoring in higher charter rates and utilization assumptions, we raise FY14F earnings by 4%, but given the changes in vessel delivery schedule, we cut FY15F earnings by 10%. However, this is more of a timing issue and we remain optimistic of the longer term transformation story for Jaya. Our TP moves up to S$0.90 on roll over to 1x blended FY14F P/BV. In line with an improved balance sheet in net cash position, Jaya has proposed a final DPS of 3.5Scts.
Publish date: 16/08/13