TAS’ 1HFY15 (May) revenue  surged 62% YoY to reach 45% of our full-year  target,  but its  core  net  profit  declined  21%  due  to lower margins. Downgrade  to  NEUTRAL  with  a  lower  MYR0.81  TP  (8.7%  upside)  from MYR1.42,  pegged  to  an  8x  FY16F  P/E.  With  no  material  contract announcement  for  the  past  10  months  and  in  view  of  declining  oil prices, we lower our FY15-17 net profit forecasts by 21-39%.  
 
Below  expectation.  TAS Offshore’s (TAS) 1HFY15  revenue  jumped 62% YoY to MYR127.6m, coming in at 45% of our full-year target, while its  core  net  profit  of  MYR9.6m  (-21%  YoY)  accounted  for  47%  of  our FY15  target.  The  higher  topline  was  mainly  due  to  higher  profit recognition  upon  delivery  of  five  vessels  in  1QFY15,  while  the  lower bottomline  was  caused  by  lower  margins.  2QFY15  core  net  profit  fell 24% to MYR4.2m from MYR5.5m in 1QFY15, led by a 33% QoQ drop in revenue  to  MYR51.3m  in  the  quarter.  The  weaker  2Q  results  were mainly  attributed  to  higher  sales  recognition  of  four  tugboats  and  an 
anchor  handling  tug  supply  (AHTS)  vessel  sold  in  1QFY15.  Note  that there  was  a  reversal  of  an  MYR3.3m  impairment  loss  on  trade receivables recognised in 1HFY14.  

Losing  momentum.  We  are  concerned  over  TAS’  earnings sustainability in FY16-17 as declining oil prices may prompt major oil and gas  (O&G)  players  to  slash  their  capex  spending. We  cut our  FY15-17 revenue  and  net  profit  forecasts  by  10-29%  and  21-39%  respectively, assuming lower orderbook replenishments during the period.

Downgrade to NEUTRAL (from Buy) with a lower MYR0.81 TP (from MYR1.42).    In  view  of  lower  oil  prices  and  potentially  lacklustre  O&G activities for at least the next one year, coupled with no material contract announcement for the past 10 months, we lower our FY15-17 net profit forecasts by 21-39%, assuming lower orderbook replenishments. We roll over  our  valuation  to  FY16  and  lower  our  TP  to  MYR0.81  (from MYR1.42), pegged to a lower FY16F P/E of 8x, in line with the average P/E valuation of shipbuilding companies under our O&G coverage.  

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

TAS Offshore Berhad is engaged in the shipbuilding and ship-repairing business. 

Recommendation Chart

Source: RHB