This was first published on www.nracapital.com, and is reproduced with permission
JAYA HOLDINGS’ Q2-2013 results look good on the surface but were a little disappointing.
Jaya reported H1-2013 revenue of US$147.2mn and net profit of US$16.6mn giving an EPS of US$ 0.84 cents. NAV is US$0.67 up from US$0.646.
Please have a look at Jaya's Q2-2013 presentation slides for more details on its operating and financial data.
Key results highlights
a) The Q2-2013 results are not strictly comparable with Q2-2012 as the latter had no vessel sales.
b) If we adjust for the vessel sales and just use the chartering figures, the Q2-2013 figures would probably have shown a 79% increase in revenue to US$25.2mn with a net profit of US$7.8mn. The chartering business is classified as Offshore Support Services
c) Vessel sales are classified under Offshore Engineering Services where Jaya sold two vessels in Q2-2013 against none in Q2-2012. This segment generated revenue of US$83.3mn and a small loss of US$1.3mn.
d) Utilisation of his fleet in Q2-2013 continued to ease to 80% compared to Q1-2013’s 84% but is significantly higher than Q2-2012’s 62% utilisation
e) Gross debt has been reduced by 35% to US$150mn with the company moving from a net debt position of US$51.5mn to a net cash position of US$26.5mn
f) Jaya is guiding for a weaker Q3-2013 citing weather and new Carbotage rules in Indonesia as reasons. Notwithstanding this, demand is expected to pick-up in 2013.
g) The restructuring and reduction of its debt has allowed Jaya to pay dividends. The company has announced an interim dividend of S$0.5 cents.
Commentary
No major surprises on the chartering side other than the new Carbotage rules in
The ship building and vessel sale business continues to see demand with two more vessels set for completion in the second half of 2013. Unlike Q2-2013, we expect Jaya to reap some profit from these sales.
The macro picture for the Offshore oil and gas sector remains positive with global oil reserves now expected to last another 64 years on current rates of consumption.
Two vessels are affected by the Indonesian Carbotage rules and Jaya is working to address this “Flag” issue. So while we may see a further dip in utilisation in Q3-2013, the recovery in its charter business is set to continue.
I still like the stock which remains undervalued at current levels. I also expect the Company to continue to reward shareholders through dividends following its token Q2-2013 recommendation of S$0.5 cents. Retain in My Stock Picks. For more details about my price target look up My Stock Picks section.
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