KEYFIELD has secured a charter from Vestigo, involving the provision of one accommodation work boat (AWB) from its current fleet, with an implied daily charter rate (DCR) of RM200,000. We consider this to be within our DCR assumptions, as some vessels were locked into older rates. We maintain forecasts, our TP at RM3.18 and keep our OUTPERFORM call.

KEYFIELD has accepted a letter of award from Vestigo for the provision of one unit of accommodation work boat (AWB) which commenced in August 2024. The firm contract is valued at RM34.6m for five months and RM13.4m for the extension period. The company will utilise one of its current fleet (DP2) which charter is expiring to execute the contract.

This is another strong win for the group as the firm charter implies a very attractive daily charter rate (DCR) of c.RM200,000 (after excluding catering, which is higher than our average assumptions for the AWBs of RM138,000 (which also includes non-DP2 vessels which typically commands lower DCRs). However, we deem this win within expectations as our assumed average rates have been skewed by longer-term charters for its other AWB fleet which are locked into lower rates since the start of FY24.

Outlook. KEYFIELD is currently in the peak season of the OSV market (typically 2Q and 3Q of the year), and we expect vessel utilisation to remain strong going into 3QFY24. The group took delivery of Keyfield Itqan (formerly known as Belait Barakah), a 239-pax accommodation work barge, on 3rd July 2024, and the vessel is currently being prepared for deployment. Keyfield Aulia (a second-hand AHTS vessel) was also added to the company’s fleet after being delivered on 13th August 2024. These vessels are expected to contribute income from 4QFY24 onwards, further driving earnings growth. Overall, we maintain that DCRs will continue to trend upwards in the local OSV market, as supply remains tight while client demand continues to increase.

Forecasts. Maintained.

Valuations. We maintain our TP of RM3.18 pegged to unchanged 11x FY25F PER, which is at a 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 exposure to the booming local OSV industry, (ii) its relatively young fleet age of eight years and DP2-rated vessels which are preferred by clients, and (iii) its inclusion as a panel contractor for AHTS for Petronas which could open doors for more third party AHTS charters. 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 - 26 Aug 2024