STI : 3,133.76
Price Target : 12-month S$ 0.91 (Prev S$ 0.90)
Steady proxy to industry upswing
• 83% fleet utilisation in low season, higher day rates from more sophisticated fleet boost charter income in 2Q-FY14
• Charter backlog improves significantly as Jaya increases its presence in the Middle East market with long-term charters
• Interim dividend of 1Sct declared (1H13 interim: 0.5Scts)
• Maintain BUY for 11% upside to TP of S$0.91, plus 4-5% dividend yield supported by net cash position
Good performance in low season. Jaya reported another steady quarter with net profit of US$7.2m, up about 16% y-o-y (excluding vessel disposal gains) on a 31% y-o-y improvement in chartering revenue. While the earnings fell slightly short of our estimates, owing to higher-than-expected operating expenses, the performance was credible, especially as Jaya managed to maintain its utilization rate at 83% in a seasonally weak quarter (monsoon season in SE Asia). Average day rates moved north of US$15,000 per day compared with US$13,500 per day range in previous quarters, as two new PSVs started contributing. Chartering gross margin remained steady at 38%.
Chartering order book expands. Jaya reported that it had successfully signed long-term contracts for three vessels in Saudi Arabia, increasing its presence in the key Middle East market and boosting its charter backlog to US$327m (including options) from US$255m as of end-1Q14. Firm orders account for US$216m, implying 1.7x book-to-bill and underpinning revenue expectations for the next 12-18 months. However, we cut headline profit numbers by 17% and 8% in FY14/15 respectively, as we are expecting lower contribution from vessel sales and disposals in FY14/15. Management guided that the sale of Jaya Sovereign and disposal of a 5,000 bhp AHTS in 3Q14 will only yield disposal gains of US$3m, compared to our expectation of about US$6-7m.
30% CAGR for core chartering PATMI; maintain BUY. While our revised headline profit numbers in FY14/15 look lower than FY13 at first glance, this is largely a result of lower gains on sale/disposal of assets. Core chartering profits for Jaya is still expected to grow strongly from about US$24m in FY13 to US$33m in FY14 and US$40m in FY15 – a CAGR of 30%, driven by delivery of 6-7 new vessels in FY14/15. Our TP – based on 1x FY14F P/BV – is adjusted up to S$0.91 as we account for a stronger US$. Re-rating is expected to continue in line with buoyant offshore support vessel industry trends.
Publish date: 22/01/14