PhillipCapital analyst Paul Chew has initiated coverage on offshore and marine (O&M) company Pacific Radiance RXS Limited with a “buy” call and a target price of 6 cents on Sept 27.
Pacific Radiance was established in 2006 and listed on the Singapore Exchange S68 ’s (SGX) Mainboard in 2013. It completed its US$576 million debt restructuring exercise in 2022. Today, the company mainly has three businesses, ship management, shipyard repair and construction and ship chartering of offshore support vessels (OSVs). It currently owns a shipyard spanning 33,000 sqm (355,209.04 sq ft) with over 180m of water frontage in Singapore. The company operates four OSVs, which are largely in the Middle East.
In his report, Chew highlights several factors going in Pacific Radiance’s favour. For instance, the analyst sees the return of earnings from OSV ship chartering services.
“In 2HFY2024 [ending Dec 31], Pacific Radiance will take delivery of three major OSVs that will provide earnings growth in FY2025,” says the analyst.
“The largest vessel is a 400-man accommodation barge Crest Station 1, to be delivered in October 2024. This vessel has secured a US$31.6 million ($40.5 million) charter contract, including an option for extension for deployment in the Middle East,” he adds.
The other vessels are a 60-man workboat (Crest Mas) and an anchor handling tug supply (AHTS) named Crest Mercury.
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“The vessels are not newly built but re-activated after being laid up for several years. Pacific Radiance has a track record in operating and reactivating vessels,” Chew notes.
In addition, Pacific Radiance is expected to begin construction work on two new crew transfer vehicles (CTVs). Whether the CTVs will be sold or used internally will be determined upon the CTVs’ completion in FY2025, says Chew.
At the moment, demand for such vessels is “robust” as Taiwan embarks on a “massive rollout” of offshore wind farms. The country’s wind farm capacity started from 2.1GW in 2023 and is expected to increase to 13.1 GW by 2030, representing a compound annual growth rate (CAGR) of 30%, notes Chew.
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Finally, the analyst sees upside from the company’s off-balance sheet operations. This includes its 32.4% stake in PT Logindo Samudramakmur Tbk (Logindo), which was written off Pacific Radiance’s balance sheet in 2022. Logindo is listed on the Indonesia Stock Exchance since 2013 and it has a market cap of $34 million. It operates 41 Indonesian-flagged OSVs with an average age of 15 years.
“Logindo is undergoing a two-stage restructuring of its operations. Vessels will be marketed globally where charter rates are higher or disposed of to reduce gearing,” says Chew.
“Pacific Radiance also operates four flagged CTVs to maintain and install offshore wind farms in Taiwan. The contribution will be smaller due to a lower equity stake,” he adds.
In FY2024, Chew expects Pacific Radiance’s ship chartering revenue to come in at US$5 million and US$14 million FY2025. About 44% of the company’s FY2023 revenue came from its ship chartering segment while its ship management business made up the remaining 56%.
“The growth in FY2025 will be driven by a jump in ship chartering operations as the three new vessels begin operation and completion of two CTVs,” says Chew.
Shares in Pacific Radiance closed flat at 4.9 cents on Sept 30.
