Brokers' take
PACC Offshore Services Holdings | Buy Target price: S$0.42 Feb 22 close: S$0.285 Maybank Kim Eng Research, Feb 22
PACC Offshore Services Holdings (POSH) has the least balance sheet risk among oil services stocks we cover, because: 1) FY15 net gearing is only 0.5 times; 2) It secured US$1 billion of loan facilities in Jan 2016 at interest rate of less than 2 per cent, where US$462 million of the loans have tenures of 5-7 years; 3) it has only US$161 million of outstanding capex commitment with US$117 million to be paid in FY16; and 4) it targets to save another US$10 million from cost cuttings in FY2016. POSH's strong financial strength vindicates our view that it will survive the downturn and emerge with stronger market share. It continues to seek jobs and recently won a contract to tow Shell's Prelude FLNG, and established a Saudi Arabia JV to target the Middle East market. We also believe that a privatisation by its parent cannot be ruled out, while downside risk is limited with the stock at historical low of 0.3 times price-to-book value.
Singapore yards OCBC Investment Research, Feb 22
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