DBS is maintaining its buy call on PACC Offshore Services Holdings (POSH) as it sees green shoots appearing in the oil services sector. With no bonds outstanding, positive operating cash flows, and a proven ability to secure work for its vessels despite the downturn, DBS likes POSH as a beta play on capex recovery.
In addition, POSH is a potential privatisation candidate with 81.89% owned by shareholder Kuok (Singapore). In a Wednesday report, analyst Suvro Sarkar says sentiment for oil services stocks should improve with oil majors increasing their 2017 capex.
We have seen the offshore working rig count increase in February 2017 for the first time since July 2014, says Sarkar, Thus, despite a still-dismal 4Q16, we expect a gradual earnings recovery in 2018.To recap, POSH reported impairments of about US$310 million ($440 million) in 4Q16, mainly on its OSV assets and goodwill attributable to the Transportation & Installation segment.
Together with impairments of US$148 million taken in 4Q15, Sarkar estimates that POSH has written down close to 30% of its aggregate fleet value. We think major impairments going forward are unlikely," concludes the analyst. Shares of POSH are down 2 cents at 35 cents.
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