Brokers' take

PACC Offshore Services Holdings | Buy Target price: S$0.41 Nov 14 close: S$0.325 DBS Group Research, Nov 14

Q3 earnings came in below expectations given the combination of startup costs for the POSH Arcadia, higher-than anticipated operating expenditure for other idle accommodation vessels, and late commencement of contracts of some of the offshore support vessels (OSV) on long-term contracts in the Middle East. OSV day rates declined slightly during the quarter, though going forward, we see limited downside to rates as the offshore industry recovers. In the near term, we see a stronger Q4 as the POSH Arcadia gets a full quarter of utilisation, and more of the Middle East OSVs are deployed.

We continue to see POSH as a name to ride the gradual offshore service sector upturn; its share price has historically been strongly correlated with oil prices, which are rising again. Further, POSH has no bonds outstanding and remains a privatisation candidate with Kuok (Singapore) Ltd as the majority shareholder (81.89 per cent ownership).