Towards Financial Freedom
Jaya - Delays In Vessel Deliveries Hurt Future Growth
In line with the expectations in our initiation report last week, Jaya's core 3QFY13 profits fell to USD2.7m as the utilisation rate plunged to 64% from 80% and 84% in the two preceding quarters. A PSV that was scheduled for completion last month was not delivered, reducing Jaya's near-term profit growth. Long-term growth will also be hit by delays of four other vessels. We maintain SELL with a TP of SGD0.55.
- USD1.3m tax masks weak results. 3QFY13 reported PATMI was USD4.0m, down 38% q-o-q. (As vessel chartering operations are continuous, q-o-q comparisons are more meaningful than y-o-y figures.) Stripping out the USD1.3m tax credit, Jaya's net chartering margin fell to 13% from 33% in 2QFY13 (See Figure 1 for full breakdowns).
- 3,000dwt PSV scheduled for delivery in April was not received. A 3,000dwt PSV ("Jaya Valour", originally scheduled for Apr-13 delivery into Jaya's fleet) has been delayed by four months. Jaya Valour was supposed to begin revenue contribution in 4QFY13 but may now only begin operations in 1QFY14.
- Five of nine vessels delayed. In total, five of the nine vessels under construction today have been delayed between two to 11 months from our original expectations. All of these are high-charter vessels - their delays will negatively impact Jaya's growth in FY14F/15F. We expect further street downgrades on the news.
- Adjust FY13F-15F EPS by 2.5%/-5.7%/-3.8%. We raise FY13F EPS slightly as the tax credit slightly outweighs the reduced contribution from Jaya Valour. FY14F/15F EPS are trimmed because of the delays in delivery of the other vessels.
- Maintain SELL with TP of SGD0.55. As the share price already incorporates expectations of strong growth in FY14F, the slowing growth is likely to act as a cap on performance. We prefer other oil & gas names like Nam Cheong, Marco Polo and MTQ with lower valuations (7x FY13F EPS vs Jaya's 9x-14x), much stronger growth profiles, and which are currently enjoying operational tailwinds.
Source: OSK
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