KEYFIELD – U-shaped Breakout?

Offshore accommodation provider. KEYFIELD primarily operates in chartering its own and third-party accommodation vessels and providing related onboard services to the oil and gas industries. Among its fleet of 11 OSV vessels, KEYFIELD's primary vessels consist of AWBs and work barges, which account for nine of the vessels.

Tight OSV market. AWBs and work barges play crucial roles throughout the lifecycle of oil and gas field projects, with demand closely tracking topside maintenance and HUC activities. Against a backdrop of persistently high oil prices and under-maintenance spending during the 2019-2020 period, upstream maintenance services have experienced a notable uptick, driving increased demand for KEYFIELD's OSV. Moreover, the supply of Malaysian-owned OSV has remained stagnant due to high leverage in local OSV companies and challenging financing from banks, contributing to a surge in DCR amid a tight OSV market. Malaysia's cabotage policy, which restricts non-Malaysian ships from participating in domestic shipping activities, further solidifies the outlook for OSV players. With no significant expansion in OSV capacities expected in 2024 alongside anticipated high oil prices, the OSV market bull run is poised to persist, benefiting KEYFIELD.

Young vessels age. KEYFIELD's strategic approach to acquire OSVs during the COVID-19 period has resulted in the procurement of young OSV vessels at competitive prices, averaging at RM46.2m book value per vessel. KEYFIELD boasts an average vessel age of eight years, lower than the industry average of 10 years. These younger OSV fleets offer additional amenities not found on older accommodation vessels, coupled with reduced operating costs and improved fuel efficiency. Additionally, nine out of KEYFIELD's 11 OSV vessels are equipped with four-point mooring and DP2 capabilities, empowering KEYFIELD's AWS to navigate more challenging environments, such as deep water and harsh conditions. The combination of younger vessel age, enhanced specifications, and lower acquisition costs positions KEYFIELD favorably to secure higher DCRs and achieve greater vessel utilization rates.

Pending U-shaped breakout. KEYFIELD is pending for a U-shaped breakout. A successful breakout above RM1.88 neckline will spur the price toward RM1.95-2.03-2.11 levels, creating a higher high pattern. Cut loss at RM1.76.

Collection range: RM1.80-1.83-1.86

Upside targets: RM1.95-2.03-2.11

Cut loss: RM1.76

Source: Hong Leong Investment Bank Research - 15 May 2024