SINGAPORE (Nov 11): DBS is maintaining a “fully valued” call on offshore support vessel (OSV) and services provider Pacific Radiance with a target price of 12 cents, citing strong headwinds and deteriorating outlook.
“The outlook for 2017 remains bleak in our view as oil majors are guiding for lower capex y-o-y, and the OSV-to-rig ratio remains at record highs,” says analyst Suvro Sarakar.
In 3Q16, Pacific Radiance reported record-low revenues, down 43.9% to $18.9 million. In addition, the company’s cash flow has been negative for four consecutive quarters, notes Suvro, and the maturity of its Aug 2018 $100 million note remains a medium term risk. The Chinese yards refund of US$11 million in 4Q16 for deposits will provide a temporary boost to cash balance, but does little to solve the core issues notes Suvro.