KUALA LUMPUR: Sealink International Bhd is expected to return to black with core earnings of RM22.5 million in the financial year 2024 (FY24), said Hong Leong Investment Bank Bhd (HLIB).
HLIB said this is backed by stronger blended utilisation rate at 68 per cent and blended spot daily charter rates (DCR) of RM30,000 per day as well as absence of lumpy one-off expenses that were incurred in FY23 (i.e. dry-docking costs and penalties).
"Subsequently, we project further earnings growth of 31 per cent in FY25, lifted by higher fleet utilisation at 75 per cent and DCR of RM33,000 per day," it said.
Sealink owns 19 active offshore support vessels (OSV) that are mainly chartered to the oil and gas industry and provides shipbuilding and repair services.
The company's FY23 blended fleet utilisation was about 60 per cent in FY23 and HLIB believes it will trend upward to over 68 per cent in FY24.
"This is driven by the robust offshore maintenance activities amidst an acute shortage of Malaysian-flagged OSVs," it said.
HLIB said Sealink is aiming to secure a few vessels to be chartered under the production operations vessels (POV) program.
The firm said nearly all vessels are currently chartered under spot rates, until the POV awards are officially concluded.
"All in, we value Sealink at 52 sen based on 10 times mid-FY25 earning per share," said HLIB.
It did not rate the stock.
"We view Sealink as a laggard in the OSV space due to its undemanding valuation amid an imminent earnings upcycle. Sealink is currently trading at seven times FY24 earnings," it added.