Pacific Radiance’s order wins to take a hit on back of lacklustre DSV demand

Expect weak results in Q4.

Pacific Radiance will struggle to clinch more orders on back of lacklustre demand for diving support vessels (DSV). According to UOB Kay Hian, its channel checks among shipbrokers point to weak demand for DSVs in 4Q14 because of a negative knee-jerk reaction by oil companies to the collapse of oil prices.

However, UOB Kay Hian believes that this is a temporary shell-shock reaction, and the demand for DSVs will return as oil firms focus on maintaining production from existing fields.

“We expect weak 4Q14 results. Earlier, Pacific Radiance had reported a sharp fall in overall gross margin to 21% in 3Q14 from 41% in 3Q13 (2Q14: 44%) due to a gross loss of US$3.2m in its subsea segment compared to a gross profit of US$7.3m in 3Q13. The losses were mainly due to the dry docking of one of its two DSVs (for upgrading of stern thruster) which led to Pacific Radiance missing the contracting window. We expect Pacific Radiance’s DSV segment to perform poorly in 4Q14 again, but DSV demand will recover in 2015 as oil companies get over their initial shock about the oil prices,” stated UOB Kay Hian.

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