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NRA Capital Pte Ltd

Written by: Jacky Lee

Friday 15 May 2015

Vallianz Holdings – 1Q15 results briefing

Strong support by Saudi Arabian conglomerate Rawabi Holding

Vallianz trades at 0.8x PBR and 5-6x historical and annualized PER. Though the valuation seems compelling, we prefer Atlantic Navigation which operates in the same space and has far lower gearing.

Despite the huge jump in revenue, Vallianz's 1Q15 net profit only increased slightly by 5% to S$5m. The growth in revenue from ship management and shipyard services was attributed to contributions from Jetlee Group, OER Group, and Newcruz Group, which was acquired in the last quarter of 2014.

Vallianz Holdings is an integrated offshore marine solutions services provider in the oil and gas industry. The Company provides marine support services, primarily marine asset ownership, leasing and fleet corporate management. The Company’s three business segments includes Vessel chartering and brokerage, Vessel management services and Investment holding. Vessel chartering and brokerage encompasses leasing of owned vessels. Vessel management services includes provision of crew, consultancy and logistics.

As of 31 March 2015, Vallianz's vessel chartering business had a fleet of 39 offshore support vessels (OSV) – owned fleet is relatively young with average age of 3 years. 23 vessels have been fully chartered out in Saudi Arabia.  

Key takeaway from results briefing:            

  • 1Q15 gross profit margins lower due to change in revenue mix and expansion of owned fleet.
  • The group generated US$13$m positive free cash flow in 1Q15, management confident the internal free cash flow can taking care of its US$65m short-term loans. 
  • Utilization in 1Q15 around 75%.
  • Spot market charter rate still competitive.
  • 49% owned associate, PT Vallianz Offshore Maritime’s margins not as good as Vallianz, the associate plans to sell 15-20% stake in IPO in the 2Q this year, according to the Indonesia Stock Exchange.
  • Order book stood at US$462m as at Mar-15, the bulk comes from the joint venture with Rawabi.
  • Middle East contract locked for 5 years.
  • Ship management revenue expected to be lower.
  • Low capex spending this year, 4 vessels delay in delivery, as much as 9 months.
  • The group plans to continue increasing its penetration in the Middle East, Latin America, South-East Asia, and West Africa to become a major OSV player through actively bidding for charters, as well as optimizing its operations by enhancing cost efficiencies and financial management.

Our view:

At S$0.059, Vallianz trades at 0.8x PBR and 5-6x historical and annualized PER. Though the valuation is compelling, we prefer Atlantic Navigation with similar business. At S$0.39, Atlantic Navigation trades at 0.9x PBR and 5.8x annualized FY15 PER. Despite both trading at similar valuations, Atlantic Navigation’s 1Q net gearing of 22% is more attractive compared to Vallianz’s net gearing of 209%. http://www.nracapital.com/research/rpt1505167563/atlantic-navigation-1q15-results-briefing

On the positive side, we feel the joint venture with Saudi Arabia's Rawabi Holding is helping Vallianz to establish stable earnings amid the downturn in the oil and gas industry. Rawabi is also Vallianz's second-largest shareholder with a 20% stake.


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