Stock Name: TGOFFS
Company Name: TANJUNG OFFSHORE BHD
Research House: MAYBANK
Tanjung Offshore Bhd
(March 1, RM1.54)
Maintain sell at RM1.65 with target price of RM1.07: Tanjung Offshore's results continue to be erratic, missing our forecasts and consensus. We remain concerned over its cost management strategies which have resulted in poor earnings. Valuations are expensive while consensus forecasts are overly aggressive.
In light of the earnings uncertainties, we adjust our target price valuations to 0.8 times in price-to-book value (PBV) terms. We had used price-earnings ratio (PER) valuations previously.
The company's reported net loss of RM116,000 in 4Q took full-year earnings to RM7 million (+128% growth year-on-year), below our and consensus forecasts of RM8 million to RM9 million.
Tanjung Offshore is unlikely to perform in 2011. It will incur RM10 million in dry-docking costs for its three vessels (MV Tanjung Pinang 1, 2, and 3) scheduled in 2011. We are apprehensive over its ability to turn around its engineering equipment, maintenance, and drilling and platform divisions, which have been in the red for the past few consecutive quarters. The firm may also suffer a one-off cost of between RM7million and RM8 million from the early redemption of its bonds as it plans to refinance its debts to conventional term loans in 1Q11.
We slash FY11 and FY12 earnings forecasts by 42% to 56%, taking into account the erratic earnings performance. Earnings visibility will remain opaque, which makes forecasting a challenge. With these uncertainties, we change our valuation basis from a PER of eight times 2012 earnings to PBV valuations. We now value Tanjung Offshore shares at RM1.07 based on a PBV ratio of 0.8 times.
Ekuinas' intentions with regards to Tanjung Offshore are unclear now, but we think it could eventually be a platform for Ekuinas to consolidate the oil and gas service providers in the market. This may enhance value for minorities in the long term. For now, Tanjung Offshore's valuations are extremely stretched at a PER of 53 times 2011 earnings and a PBV ratio of 1.2 times (historical). ' Maybank IB Research, March 1
This article appeared in The Edge Financial Daily, March 2, 2011.
Company Name: TANJUNG OFFSHORE BHD
Research House: MAYBANK
Tanjung Offshore Bhd
(March 1, RM1.54)
Maintain sell at RM1.65 with target price of RM1.07: Tanjung Offshore's results continue to be erratic, missing our forecasts and consensus. We remain concerned over its cost management strategies which have resulted in poor earnings. Valuations are expensive while consensus forecasts are overly aggressive.
In light of the earnings uncertainties, we adjust our target price valuations to 0.8 times in price-to-book value (PBV) terms. We had used price-earnings ratio (PER) valuations previously.
The company's reported net loss of RM116,000 in 4Q took full-year earnings to RM7 million (+128% growth year-on-year), below our and consensus forecasts of RM8 million to RM9 million.
Tanjung Offshore is unlikely to perform in 2011. It will incur RM10 million in dry-docking costs for its three vessels (MV Tanjung Pinang 1, 2, and 3) scheduled in 2011. We are apprehensive over its ability to turn around its engineering equipment, maintenance, and drilling and platform divisions, which have been in the red for the past few consecutive quarters. The firm may also suffer a one-off cost of between RM7million and RM8 million from the early redemption of its bonds as it plans to refinance its debts to conventional term loans in 1Q11.
We slash FY11 and FY12 earnings forecasts by 42% to 56%, taking into account the erratic earnings performance. Earnings visibility will remain opaque, which makes forecasting a challenge. With these uncertainties, we change our valuation basis from a PER of eight times 2012 earnings to PBV valuations. We now value Tanjung Offshore shares at RM1.07 based on a PBV ratio of 0.8 times.
Ekuinas' intentions with regards to Tanjung Offshore are unclear now, but we think it could eventually be a platform for Ekuinas to consolidate the oil and gas service providers in the market. This may enhance value for minorities in the long term. For now, Tanjung Offshore's valuations are extremely stretched at a PER of 53 times 2011 earnings and a PBV ratio of 1.2 times (historical). ' Maybank IB Research, March 1
This article appeared in The Edge Financial Daily, March 2, 2011.
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