KEYFIELD is acquiring a second-hand accommodation work boat (AWB) and building a new one in China. The second-hand vessel is expected to start to contribute in FY25, while the new build will be delivered in FY26. We raise our FY25F net profit forecast by 6%, lift our TP by 6% to RM2.85 (from RM2.69) and maintain our OUTPERFORM call.

KEYFIELD is acquiring a second-hand DP2-enabled AWB named 'MV Belait Barakah' for USD6m (RM28.3m) with a 152-passenger capacity from Belait Barakah Sdn Bhd. The vessel is currently idle and laid up in Miri, Sarawak. KEYFIELD will spend an additional RM10m to bring the vessel back to working conditions within 90 to 120 days after the completion of the deal in 3QCY24.

Separately, KEYFIELD has placed an order for a new dynamic positioning 2 (DP2) AWB with Jingjiang Nanyang Shipbuilding Co Ltd (JNS) and Nantong Shunyang Trade and Development Co Ltd (NTSD) in China for USD30.5m (RM143.7m). The AWB can accommodate 239 passengers and uses a diesel-electric propulsion system.

The total capital outlay of RM182m will turn KEYFIELD from a net cash of RM39m as at end-1QFY24 to a net debt and gearing of RM143m and 0.2x which are still highly manageable.

Outlook. We expect strong 2Q and 3Q ahead as all its vessels will be operating near full capacity post the monsoon season. The majority of its AWB are currently engaged in medium-term charters of six to nine months. Should demand for AWBs remain robust, we project that the group could secure higher daily DCR for FY25. Given the tight supply of offshore support vessels (OSV) in Malaysia on robust activities, we expect DCRs to continue rising in coming months.

Forecasts. We raise our FY25F net profit forecast by 6% after factoring in contribution from MV Belait Barakah. We assume 75% vessel utilisation with a DCR of RM110,000.

Valuations. We upgrade our TP by 6% to RM2.85 (from RM2.69) pegged to an unchanged 11x FY25F PER, which is at slight premium to 10.2x median OSV multiple due to its younger fleet and higher fleet specifications.

Investment case. We like KEYFIELD due to: (i) its presence in the booming AWB subsector on tight supply, (ii) its relatively young fleet age of eight years and DP2-rated vessels which are preferred by clients, and (iii) a strong war chest by virtue of a low net gearing. Maintain OUTPERFORM.

Risks to our call include: (i) significant decline in Brent crude prices, (ii) unexpected vessel downtime due to unplanned maintenance, and (iii) decline in oil producers’ capex planned.

Source: Kenanga Research - 26 Jun 2024