Company updatedate:
Wintermar Offshore Marine (WINS IJ, NEUTRAL, TP: IDR220)
Soldiering On During The Downcycle
We
visited Wintermar for updates on its business as well as the potential
jobs flow from the commencement of Tangguh's third LNG train, a massive
project that carries an investment value of USD8bn
until 2020. We believe its fleet utilisation rate should improve by
2H17, but expect freight rates to remain depressed due to the
insufficient jobs for the OSV market. The company is in the midst of
debt restructuring. We stay NEUTRAL, until more details on
the restructuring are made known.
♦ Still in survival mode.
In our view, Wintermar Offshore Marine (Wintermar) is still in survival
mode. Management carried out USD2.5m worth of vessel impairments in 4Q15
and said its freight rate per horse power – a common benchmark to gauge
the profitability of OSVs – has fallen to
less than USD0.80/brake horsepower (bhp). This was from levels as high
as USD2/bhp. Meanwhile, Wintermar’s overall fleet utilisation is below
50%. This was as most of the jobs flow related to deepwater oil &
gas fields were halted after crude oil prices tumbled.
♦ In the midst of debt restructuring.
Wintermar is currently negotiating with its bankers to postpone the
principal debt repayment of loans related to its vessels. It has
restructured about one-third of the debt with its principal banker and
is looking to do the same with its remaining debt. As
the process is still ongoing, management could not give us too much
information at this juncture.
♦ Tangguh Train 3 contributions
from 2H17. BP approved the final
investment decision (FID) of Tangguh's third LNG train in mid-2016. The
project is now in the engineering, procurement and construction phase.
Drilling on 11 wells is expected to commence in Jun
2017, which would drive demand for high-tier OSVs by then. Our industry
source from Singapore said that this project requires the services of
>100 OSVs throughout its lifespan.
♦ Expect more jobs to gradually
come in. We discovered from several OSV
players we visited in the region that the jobs flow from Tangguh is not
sufficient to drive OSVs’ freight rate recovery. Although the outlook is
still challenging, now that crude oil price
has stabilised above USD50/bbl, oil majors are looking to restart
deepwater projects and lock in the currently low project costs. Having
said that, the pace of jobs returning may be slow due to the time lag
between the FID and well developments.
♦ NEUTRAL,
pending further details of the debt restructuring exercise.
While we are optimistic on Wintermar’s potential turnaround in FY17-18
and its depressed valuation of 0.33x FY17F P/BV, we still have concerns
on its freight
rates downtrend and weak cash flow-generation abilities. This is in
regards to its impending USD34m principal debt repayment in the coming
year (should the restructuring initiative be unsuccessful). We remain
NEUTRAL and roll over our valuation to FY17. Our
new IDR220 TP (from IDR195) is pegged to 0.3x FY17F P/BV. Key downside
risks are solvency and business risks.
Kindly click the following link for the full report: Wintermar Offshore Marine : Soldiering On During The Downcycle
Best regards,
Norman Choong, CFA
Assistant Vice President
Research Analyst – Utilities, Oil & Gas, Poultry
PT. RHB Securities Indonesia
