KEYFIELD has secured a charter contract for the provision of an anchor handling tug supply (AHTS) vessel, which we believe, will be fulfilled using a third-party vessel. It is also acquiring a second- hand AHTS for RM34.6m. We raise our FY25F earnings forecast by 2% to account for the third-party vessel charter (while the fleet expansion is in-line with our assumption). We lift our TP by 2% to RM3.06 (from RM3.00) and keep our OUTPERFORM call.

KEYFIELD has secured a contract from Carigali-PTTEPI Operating Company Sdn. Bhd. (CPOC) for the provision of one 80mt bollard pull AHTS vessel for CPOC’s offshore activities. We believe that KEYFIELD will likely charter a third-party vessel to fulfill the contract to avoid straining its balance sheet. We do not rule out the possibility of it acquiring the vessel down the road, depending on the market condition over the medium term.

It is also acquiring a second-hand AHTS named MV Aulia for USD7.8m (RM34.6m). Currently being chartered by KEYFIELD, the vessel is three years old with a bollard pull of 60mt. The acquisition will turn KEYFIELD from a net cash position as at end-Mar 2024 to a net debt and gearing of RM178m and 0.3x 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 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. We raise our FY25F earnings forecast by 2% after assuming an additional third-party AHTS charter. Our forecasts already assume the acquisition of an AHTS.

Valuations. Correspondingly, we lift our TP by 2% to RM3.06 (from 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. There is no adjustment to our valuation based on ESG given a 3-star rating as appraised by us (see Page 4).

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 - 7 Aug 2024