Maybank IB said Icon Offshore should be able to at least maintain an annual five sen dividend per share.
PETALING JAYA: Icon Offshore Bhd
is likely to record strong earnings growth as it renews contracts with Petroliam Nasional Bhd (PETRONAS) for 11 of its offshore service vessels (OSVs) in the third quarter this year (3Q24).
According to Maybank Investment Bank (Maybank IB) Research, the majority of Icon’s fleet (18 OSVs in total) did not benefit from the vast daily charter rate (DCR) hike throughout the last few years as the group has locked in long term contracts.
The research house said industry peers have gained from high spot rates over the past two years while Icon Offshore preferred to focus on its long term OSV chartering business to ensure earnings longevity instead of indulging in the spot market.
It said Icon Offshore’s peers, Perdana Petroleum Bhd, Dayang Enterprise Holdings Bhd and Petra Energy Bhd had benefited from the increase in DCR rates over the past two years due to higher spot-to-term ratio of their respective fleets.
As for Icon Offshore, its 11 OSVs are chartered to PETRONAS under the Integrated Logistic Control Tower programme in 3Q22 at relatively low DCRs.
Maybank IB said Icon Offshore should be able to at least maintain an annual five sen dividend per share, which translates into a dividend yield of 7.5%, based on improving net cash flow post the long term contract renewals for 11 of its OSVs in 3Q24 on higher charter rates.
The research house’s dividend expectations also stemmed from Icon’s Offshore’s low capital expenditure business model, mainly for maintenance and dry-docking as well as its manageable debt repayment obligations.
It has revised forecasts, assuming a blended average DCR of RM38,500, RM45,000 and RM53,500 and flattish 83%-85% utilisation rate for financial year 2023 (FY23) to FY25.
“We project a net profit growth of more than five times in FY24 and a further 83% in FY25, implying a monumental two-year (FY23 and FY25) compounded annual growth rate of 204%,” Maybank IB said.
