From Company's Prospectus
1. Business
Description
Singapore-based
offshore support services providers. Pacific Radiance is a fast expanding owner and operator
of a young and diverse fleet of offshore vessels with a significant presence in
Asia. It operates in 3 key segments:
(i)
Offshore Support Services
(ii)
Subsea Business
(iii)
Complementary Business - Marine Equipment Business/Project Logistics Business
From Company's Prospectus
Diverse and modern
fleet with decent utilization rates. Pacific Radiance currently
wholly own and operate a total of 62 offshore vessels which are chartered out
to various IOCs (International Oil Company) and NOCs (National Oil Company),
international oil and gas contractors and international seismic companies. In
addition, they have another fleet of 71 offshore vessels via its JV and
Associated Companies.
The
fleet of OSVs (exclude the 71 vessels owned through JV and Associated
Companies) has an average age of approximately 3 years. Utilization rate has
also improved steadily since FY2010.
From Company's Prospectus
Full-value chain
services within the E&P cycle. Pacific Radiance
caters to the different phases of oil and gas field project life cycle as
detailed by the diagram below:
From Company's Prospectus
Exposure to cabotage-protect markets. The company's strategic
partnerships with its foreign partners have allowed them to penetrate into key
markets with high barriers to entry in the form of cabotage laws, such as Indonesia, Malaysia
and South America.
Cabotage
rules provide that vessels that flagged the respective country's flag are given
priority ahead of vessels flagged elsewhere.
Diagram
below detailed the historical milestones of the company:
From Company's Prospectus
2. Use of Proceeds
From Company's Prospectus
3. Financial
Highlights
Offshore support
services contributes the most revenue; with growing importance from subsea. Offshore support
services contributes most of the revenue (FY10 - 95%, FY11 - 83%, FY12 - 84%,
1H13 - 67%). Subsea is starting to grow in importance as the company seeks to
grow this segment.
From Company's Prospectus
Asia
represents a core market for Pacific Radiance. The company has successfully diversified its revenue on a
geographical level since FY2010, however Asia
continues to be a core market for Pacific Radiance accounting for 58% of the
revenue in 1H13.
From Company's Prospectus
Decent growth
achieved throughout the year. Pacific Radiance has achieved decent top line
and bottom line growth throughout the years. (see diagram below) EPS has also been achieving steadily.
From Company's Prospectus
From Company's Prospectus
P/B looks slightly expensive compared to peers but
fair on forward P/E perspective. On a P/B basis, Pacific Radiance looks
expensive compared to the other SGX-listed peers (with the exception of Ezion). Nevertheless, on a forward P/E terms it
looks fair if they are able to continue to deliver its growth.
4. Investment
Highlights
Attractive
industry. The era of "easy oil" is over and Southeast Asia'
deepwater market will grow in importance going forward, OSV players that are
equipped to handle harsher drilling condition will be in demand. In addition, oil
prices is expected to stay at a healthy level and this will be positive for the
oil sector as a whole.
Diverse
and modern fleet. I like the fact that the average age of its fleet is approx 3
years, which is younger than the industry average. E&P players typically
are willing to pay a premium for a younger fleet given that they are better equipped
with the latest technology.
Access
to cabotage protected markets. As mentioned, access to cabotage markets help
boost the utilization and charter rates of locally flagged vessels and its
associated companies, particularly in Indonesia.
Listing
of associate company, PT Logindo. Once listed, the PT Logindo might provide a
positive re-rating on the valuation of Pacific Radiance.
5. Investment
weakness
Crude oil price. As usual, oil
industry is cyclical and the volatility of oil price might impact the company.
Competitive market. The OSV market is
competitive in nature, with bigger players having a stronger balance sheet posing
a threat for the company.
Regulatory Risk. Cabotage ruling might
change and it might impact the protected market for Pacific Radiance.
6. Technical Analysis
Out
of the 171.8 million of shares placed, only 5 million of share is by way of
public offer making the free float to retail investors like us very little, the
remaining are placed out as placement tranche.
I
have a feeling that the technical demand for this issue might be strong.
7. Conclusion
I like the sector and
I like the story of the company.
Valuation wise it is
fair to me and given my favourable outlook for the sector, I will give it a
BUY call for the IPO. (especially given the decent performance of Rex and
KrisEnergy)
8. Timetable
From Company's Prospectus
