KEYFIELD has been awarded, by Hess Malaysia, contracts worth RM40m for the provision of one accommodation work boat (AWB) and one anchor handling tug supply (AHTS) vessel. The implied daily charter rate (DCR) for the AWB exceeds our assumption. We raise our FY24-25F net profit forecasts by 6% and 5%, respectively, lift our TP by 5% to RM3.00 (from RM2.85) and maintain our OUTPERFORM call.

KEYFIELD has been awarded, by Hess Malaysia, contracts worth RM40m for the provision of one AWB and one AHTS, commencing Jun and Jul 2024 with contract durations of five and six months, respectively.

Based on our back-of-the-envelope calculation, the implied daily charter rate (DCR) for the contracted AWB is up to RM200,000, while the DCR for the AHTS is up to USD1.9/bhp. The estimated DCR for the AWB (RM110,000) is above our assumption while that of the AHTS is within. We are positive on the latest development.

Outlook. We expect strong 2Q and 3Q ahead as all its vessels will be operating near full capacity post the monsoon season. The majority of its AWB are currently engaged in medium-term charters of six to nine months. Should demand for AWBs remain robust, we project that the group could secure higher DCR for FY25. Given the tight supply of offshore support vessels (OSV) in Malaysia on robust activities, we expect DCRs to continue rising in coming months.

Forecasts. We raise our FY24-25F net profit forecasts by 6% and 5% after adjusting for higher average DCR to RM108,500-128,500/day from RM104,900-124,000/day post the contract wins.

Valuations. Correspondingly, we upgrade our TP by 5% to RM3.00 (from RM2.85) pegging to unchanged FY25F PER of 11x, which is at 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 presence in the booming AWB subsector on tight supply, (ii) its relatively young fleet age of eight years and DP2-rated vessels which are preferred by clients, and (iii) a strong war chest by virtue of a low net gearing. 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 - 5 Jul 2024