KEYFIELD yesterday delivered its geotechnical vessel Keyfield Helms 1 (KH1) on a 3+2 years charter contract to client Helms Geomarine, which will deploy the vessel for a Petronas geotechnical investigation contract. This is in line with our assumption that the vessel will be chartered out in FY24-25 at prevailing rates. We maintain forecasts, TP of RM3.00 and OUTPERFORM call.

KEYFIELD yesterday delivered KH1, a dynamic positioning 2 (DP2) geotechnical vessel, to Helms Geromarine Sdn Bhd on a 3-year firm charter with a 2-year extension option commencing in July 2024. The agreement was initially signed in Dec 2023. KH1 will primarily support its client in executing a 3-year geotechnical investigation contract with Petronas with a 2-year extension.

We believe the daily charter rate (DCR) will be around RM100,000 or slightly higher, given the recent bullish market conditions. Hence, the win is largely in line with our assumptions. Additionally, this indirectly suggests that Petronas might be ramping up its exploration activities, indicating potential growth in greenfield upstream projects.

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 accommodation work boats (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. Maintained Valuations. We also keep our TP of RM3.00 pegged to an unchanged 11x FY25F PER, which is at a 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 - 12 Jul 2024