Kim Heng Offshore & Marine reported a 44% YoY drop in revenue to S$11.2m and a net loss of S$2.8m in 2Q15, compared to net profit of S$1.6m in 2Q14. The offshore rig services and supply chain management segment saw a S$5.3m decrease in revenue due to continued low demand for maintenance of rigs and related goods and services from our customers as oil prices remain low, while the vessel sales and newbuild segment saw a S$3.6m fall in revenue, partly because there were no vessel sales in 2Q15. Gross profit margin was only 9.1% in 2Q15 vs. 30.2% in 2Q14, as the group undertook lower margin jobs.

Looking ahead, the group expects its business to remain challenging in the next 12 months. Meanwhile, it acquired additional crane assets to expand its crane business in 2Q15. Pending more details from management, we maintain our HOLD rating on the stock with our fair value estimate of S$0.13 under review.

Source: OCBC Research - 12 Aug 2015