KEYFIELD has entered into a MOA to acquire a DP2-enabled PSV for RM79.2m and the vessel is expected to be ready for operations by Jun 2025 the latest. No charter has been announced for the vessel yet; hence, we decide to hold back imputing additional earnings potential from the vessel at this juncture. For illustration, a DP2 PSV could fetch up to RM100,000/day revenue in the current market. We maintain our earnings forecasts, TP of RM3.18 and OUTPERFORM call.

KEYFIELD has entered into a Memorandum of Agreement (MOA) for the acquisition of a DP2-enabled platform supply vessel (PSV), Keyfield Gratitude, for USD17.6m (RM79.2m which also includes RM9m rectification costs). Built in 2019, the vessel accommodates 59 crew members. The acquisition price is deemed fairly valued at market price as compared to the 2016-built DP2 PSV listed for sale which is going for USD14m before potential retrofitting costs. Funding for the acquisition is unlikely to be an issue, as the group has bolstered its financial position with a RM200m Sukuk Wakalah issuance in December 2024.

The vessel which is China-built, will require approval from Jabatan Laut Malaysia to be permanently Malaysia-flagged, with delivery expected by February 2025 and operational readiness by June 2025 after rectification works. Based on market rates, a DP2-enabled PSV could generate RM100,000/day in revenue, implying an earnings boost of RM3.6m at 50% utilisation. This translates to a 1.5% increase in projected earnings, which would subsequently lead to a 1.5% uplift in our TP. While this acquisition is a positive development for KEYFIELD, we remain conservative and exclude potential contributions from the vessel until a charter is secured.

Outlook. The group took delivery of Keyfield Itqan (formerly known as Belait Barakah), a 152-pax accommodation work barge, on 3rd July 2024, and the vessel is currently being prepared for deployment.

Keyfield Aulia (a second-hand AHTS vessel) was also added to the company's fleet after being delivered on 13 August 2024. These vessels are expected to start contributing from 4QFY24 onwards, further driving earnings growth. Overall, we maintain that DCRs will continue to trend upwards in the local OSV market, as supply remains tight while client demand continues to increase.

Forecasts. Maintained.

Valuations. We maintain our TP of RM3.18 pegged to 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 exposure to the booming local OSV industry, (ii) its relatively young fleet age of eight years and DP2-rated vessels which are preferred by clients, and (iii) its inclusion as a panel contractor for AHTS for Petronas which could open doors for more third party AHTS charters. 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 Jan 2025