Towards Financial Freedom
Jaya - New Extension For 20 Gul Way
Jaya announced it has secured charter contracts for three platform supply vessels (PSVs) currently under construction. We estimate the total contract value for the vessels at USD61.3m, which falls short of our expectation of between USD76m and USD81m. We see more downgrades in consensus numbers and maintain our contrarian SELL call, with a lower TP of SGD0.53.
- 3 plus X contracts from South-East Asian, Latin American clients. The charters are fixed for three years, with options for an unspecified period of time. While these long-term charters are positive in terms of earnings visibility, they tend to lock in lower-than-expected charter rates for the foreseeable future.
- One-time charter, two others likely lower-value bareboat charters. The 4800-deadweight tonne Jaya Valour is on a fixed time charter to a South-East Asian client, bringing the total contract value to only about USD61.3m. Had all three PSVs been time-chartered as previously projected, their contracts would have totaled between USD76m and USD81m. The current scenario suggests that the two 3500-dwt PSVs bound for Latin America are on bareboat charters, which bring in significantly less income. We think this is mainly due to the fact that it is operationally simpler to bareboat a vessel halfway across the globe than to have to manage the crew, which is necessary in a time charter.
- Trim FY14F/15F estimates by -0.5%/-3.8%. Expect further street downgrades. Factoring in the lower charter rates, we trim our FY14F/FY15F estimates by -0.5%/-3.8%. We believe that street estimates, which are still too optimistic, are bound for a downward
revision to reflect the lower rates and delays in vessel deliveries. - Maintain contrarian SELL, lower SGD0.53 TP. We maintain our SELL on Jaya as: i) these charter wins have been factored into street
forecasts, which still show returns on equity under 9%, ii) delays in vessel deliveries have hurt growth prospects, iii) Jaya appears overvalued at forward P/Es of 12.7x/9.4x, against OSV-related peers with stronger growth profiles at 6x to 8x.
Source; OSK
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