• Share prices staged a 11% relief rally from YTD low of RM0.35. ICON is one of the largest offshore support vessel (OSV) companies in ASEAN. From a 6- month high of RM0.455 (31 Dec 15), ICON’s s hare prices tumbled further by 23% to a low of RM0.35 (1, 9 & 15 Mar) as sentiment was affected by wild swings in oil prices and huge losses in 4Q15 results.

• Nevertheless, share prices managed to rebound 11% to end at RM0.39 yesterday in tandem with the rally in crude oil prices and narrowing losses in 1Q16 results. Investors also gained optimism that the new Managing Director En Amir Hamzah Azizan, a top executive from PETRONAS (appointed effective 1 Mar), is able restructure, rejuvenate and eliminate past negative perception (corporate governance, cost management) of ICON, given his vast 26 years of proven industry and international experience and extensive knowledge of the oil and gas industry. In addition, sentiment on ICON was lifted by potential M&A as PETRONAS’ call for cons olidation in the OSV market had made ICON a M&A hotbed, which is a key catalyst to unlock values.

• Look beyond 2016. Core PATAMI in FY16 is expected to plunged 67% yoy. Nevertheless, ICON is likely to record a 50% core profit CAGR from 2015-2018 premised on (i) utilisation rate is maximised through competitive tendering for domestic and regional contracts; (ii) expanded presence in Brunei; (iii) continued cost optimization and debts restructuring; and (iv) gradual recovery in the challenging OSV sector in 2017/18.

• Bullish downtrend line breakout. Yesterday, ICON’s s hare prices jumped 4% to RM0.39 accompanied by huge volume of 11m shares (almost 590% higher against 3-month average) and downtrend resistance breakout of RM0.375, signaling more upside ahead amid bottoming up indicators. We expect prices to climb higher towards RM0.405 (50% FR) and RM0.415 (61.8% FR) in the near term. A decisive breakout above RM0.415 will spur prices higher to test our long term price target of RM0.455. Key supports are RM0.375 (10-d SMA a

Source: Hong Leong Investment Bank Research - 10 Jun 2016