Investment Highlights

We maintain BUY on Keyfield. We recently attended a 2-day site visit on 2 of its vessels, namely: (a) Keyfield Wisdom and (b) Keyfield Falcon, which are currently undergoing maintenance. Current operational performance are within our expectations and the Group’s prospects remain intact. We gather from management that utilisation in 1QFY25 will be lower on a quarterly basis at 55% to 65% due to dry-docking activities. Nevertheless, revenue per day appears to be normalising at current elevated levels for both the Accommodation Work Boat (AWB) and the Anchor Handling Tug Supply (AHTS) segments. Our target price (TP) of RM3.25/share is based on CY26 PE of 10x, at par to the local OGSE peer average.

• Planned maintenance programme on schedule. We gather that there are the Group has 9 vessels undergoing planned maintenance at anchorage or drydocked with Labuan Shipyard and Engineering (LSE) in Victoria Harbour, Labuan and PT ASL in Batam, Indonesia. As such, we expect utilisation rate for 1QFY25 to be lower on a quarterly basis at 55% to 65%. This is within our expectations and is part of business operations to ensure vessel integrity. For comparison, the realised utilisation rate for 1QFY24 was at 67%. We believe this will pick up in 2Q based on our full-year forecast of 85%.
• Charter rate normalising at elevated levels in 2025. We gather from management that revenue per day for the AWB and the AHTS segments remain stable, largely premised by the ongoing tight supply environment. Based on our observation of the most recent charter contracts by the Group and other offshore support vessel (OSV) peers, we estimate rates at RM85k-RM95k for non-DP2 AWBs and RM35k-RM40k and AHTS. respectively. This presents a potential upside to our earnings as our forecast currently incorporates average assumption of RM85k and RM40k for the segments respectively. We believe revenue per day are likely to normalise at current levels moving forward as vessel availability continued to be limited.
• Expect new charter awards in February-March. According to our tracking of the Group's contract, several of its assets has ended their on-hire period in December 2024. Management updates that they have submitted new tenders accordingly and expect awards to be made in this quarter. We are hopeful over the delivery, based on the estimated requirements stated under Petronas Activity Outlook (PAO) 2024-2026 which shows that demand for OSVs will continue to be resilient.

Regular maintenance to ensure operational efficiency, safety and compliance

Periodic maintenance and dry-docking activities

Periodic vessel maintenance is made either on at anchorage or through dry-docking depending on the planned work scope and the availability of space in the shipyard. Performing maintenance whilst in anchorage does not require the vessel to leave seawater, thereby reducing downtime and costs. In comparison, dry-docking is a maintenance procedure for vessels that are being removed from water to facilitate the inspection, cleaning, repair, and refurbishment of submerged parts that are inaccessible during normal operations. This process focuses on components such as the vessel's hull, propellers, rudders, and other underwater systems to ensure safety and regulatory compliance.

Typically, dry docking is performed every five years, although the frequency may vary based on the vessel's age, condition, and operational requirements. For Keyfield vessels, Lestari is currently undergoing its second dry docking, having reached 10 years of service age. In comparison, older vessels such as Commander, Amanah and Itqan, which have been in operation for 16 years, are now undergoing their third dry docking cycle. This scheduled maintenance ensures the longevity and reliability of these assets.

Biggest work barge in Malaysian water: Keyfield Blooming Wisdom

Keyfield Wisdom is a non-propelled accommodation work barge with a maximum capacity of 500 people at a time. Its length is 123 meters, and 38 meters in width. It is the largest accommodation work barge in Malaysia and is highly favored by clients due to its substantial size and relatively young fleet (built in 2022). The workable deck space spanning 2,220m wide, with a helideck. Typically, the vessel serves as a satellite station where offshore crew members reside before being dispatched to individual platforms and rigs via smaller workboats.

The Wisdom is equipped with an 8-point mooring system, each anchor weighing 13.5 tonnes. The cost for each anchorage wire is approximately RM300,000, with the barge maintaining nine wires onboard-eight in operation and one as a backup. These anchors are critical for holding the barge steady during operations.

Another key selling point of the Wisdom is its ownership of two onboard cranes. Notably, the main crane has safe working load 300 tonnes at 16-metre radius.

The catering to passengers' ratio is 1:10. For instance, if the vessel houses 400 passengers, 40 Keyfield catering crew will be deployed. Additionally, another 30 to 35 marine crew members are assigned to manage the vessel's operations and maintenance.

During anchor retrieval process, two Anchor Handling Tug Supply (AHTS) vessels are deployed to each anchor. The operation may last two to three days for an 8-point mooring vessel, as the towing is performed one anchor at a time to maintain focus throughout the lengthy process.

The asset boasts a high return on investment (ROI) when on-hire, as its primary costs are limited to depreciation and crew salaries, making it an efficient asset in offshore operations. The vessel's fuel and AHTS are borne by clients.

Recently, Keyfield marks a significant milestone as it completed its pilot solar photovoltaic ("PV") project on Wisdom, carving its achievement in Malaysia Book of Record as the offshore vessel with highest number of solar panels and battery storage onboard. The project, in collaboration with Worldwide Holding, involves the installation of a 121.2kW solar hybrid system with battery energy storage system (BESS). The technology enables storing electrical energy for later use. Hence, providing reliable backup power and reduced dependency on onboard generator sets. According to our channel check, the solar panel can power up to 10% of total vessel electricity demand. The adoption demonstrates Keyfield's commitment towards environmental-friendly practices in the maritime industry.

Source: AmInvest Research - 22 Jan 2025