| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM1.70 (+3.0%) |
| Last Traded | RM1.65 |
| Recommendation |
TA Securities has initiated coverage on a prominent marine asset owner and offshore accommodation vessel operator, assigning a “HOLD” rating with a target price of RM1.70 per share. The valuation, which includes a 3% ESG premium, is based on 9.0x FY26F EPS and suggests a modest 3.0% upside from its last traded price of RM1.65. While the company has demonstrated robust financial performance, the investment bank believes its risk-reward profile is currently balanced, pending clearer catalysts for a potential rerating.
Strong Financial Momentum
The company reported significant financial growth over the past two fiscal years. Revenue surged by 82.2% year-on-year to RM430.5 million in FY23, with core net profit increasing by an impressive 114.9% to RM107.1 million. This strong performance was attributed to an expanded fleet of owned vessels, higher utilisation rates (78.8% in 2023), increased chartered days for third-party vessels, and improved average daily charter rates (DCR). The momentum continued into FY24, with revenue climbing 59.6% year-on-year to RM687.2 million and core net profit rising 112.7% to RM227.8 million, driven by sustained higher average DCR and an 80.4% full-year utilisation rate for its own vessels.
Strategic Growth Drivers
The company’s strategic initiatives underpin its operational resilience. It has notably expanded its premium DP2 AWB (Dynamic Positioning 2 Accommodation Workboat) segment through a RM76 million, sukuk-funded acquisition, bringing its DP2 count to seven units. This expansion enhances exposure to high-spec charter demand, where supply remains tight, fostering better rate traction and earnings accretion into FY26F. Furthermore, its long-standing PETRONAS licence and Panel Contractor Contract (PCC) appointments provide direct access to tender pipelines, ensuring recurring deployment and mitigating idle risk. A solid orderbook of RM377.4 million as of June 30, 2025, provides significant near-term revenue recognition visibility and underpins operating cash flow stability. The company also benefits from one of Malaysia’s youngest and most competitive DP-capable AWB fleets, averaging eight years, which enhances charterability, reduces maintenance costs, and supports margin resilience.
Outlook and Challenges
Despite past strong performance, TA Securities forecasts a period of earnings normalisation. Revenue is expected to moderate in FY25F to RM451.1 million, as day rates ease from recent highs and fleet utilisation stabilises. Core net margin is also projected to normalise from its peak of 33.1% in FY24 to 26.9% in FY25F due to pricing resets as contracts roll over. However, margins are anticipated to rebound to 30.3%-30.4% in FY26F-FY27F, supported by increasing contributions from higher-spec DP2 accommodation work, which offers a stronger margin profile. The deployment of its new vessels is expected to partially offset FY25F pricing pressure and enhance medium-term visibility, alongside disciplined cost management.
Potential risks include a prolonged fall in Brent crude prices impacting offshore campaigns and utilisation, the company’s reliance on the PCSB/PAC tender ecosystem, and the inherent volatility stemming from short-tenure charters (1-8 months) which may lead to start-date delays or off-hire gaps.
Investment Rating
TA Securities maintains a “HOLD” recommendation, noting that while the company’s expanding DP2 accommodation fleet and robust contract coverage will support a resilient earnings base, the overall risk-reward profile is considered balanced at this juncture. The investment bank acknowledges the company’s strong ESG performance, assigning a four-star rating, which reflects solid governance, clear decarbonisation efforts, and structured social responsibility programmes.
