SINGAPORE (Jan 9): DBS Vickers Securities is turning positive on Mermaid Maritime, upgrading its call on the stock from “hold” to “buy” at a raised target price of 24 cents from 14 cents previously due to a more favourable risk-reward profile.
In a Monday report, analyst Suvro Sarkar says the risks for Mermaid Maritime have dissipated following its recent announcements of rig and vessel cancellations, in addition to the news of a three-year contract extension for the company’s associate jack-up rig, AOD III.
(See also: Mermaid Maritime’s associate AOD clinches contract extension for third jackup rig)
“Mermaid has low gearing of c.0.11x with no bonds and no capex outstanding – a big comfort factor. Though the stock has rallied, we believe some upside remains on the table,” notes Sarkar, who also sees further upside potential for Mermaid’s privatisation by its parent company Thoresen Thai Agencies PCL and its associated promoter group.
Despite the company’s lower order book as of 3Q16, the analyst thinks higher prices following OPEC’s production cut should help to lift maintenance or repair activities, especially in 2H17.
“Mermaid has recently extended the charter of its Indonesian-flagged vessel by another year instead of returning it, thus signaling higher confidence in order win prospects in the region, going forward,” adds Sarkar.
Shares of Mermaid closed 3.8% higher at 19.3 cents.
