Pacc Offshore Services Holdings (POSH) reported a 3% YoY rise in revenue to US$67.0m but saw a 30% fall in net profit to US$14.6m in 3Q14, bringing 9M14 net profit to US$63.2m. However, excluding one-off items such as vessel disposal gains, we estimate core net profit to be about US$3m in the quarter, below expectations. This was partly due to lower gross margins of 25.9% in 3Q14 vs 41.1% in 3Q13 and 30.1% in 2Q14.

Share of JV results was also a negative US$5.7m, mainly due to the JVs in Mexico. Looking ahead, the group’s SSAV, POSH Xanadu, is expected to generate revenue towards the middle of 1Q15, while the other SSAV, POSH Arcadia, is scheduled to be delivered in 2Q15 and efforts are underway to secure employment. With the change in analyst coverage and pending details from management, we put our Buy rating and fair value estimate of S$1.21 under review.

Source: OCBC Research - 17 Nov 2014