Main Market-bound Keyfield to gain from AWB market upcycle

KUALA LUMPUR: The outlook is bright for Keyfield International Bhd as its timely expansion into the accommodation work barge (AWB) market puts the company in position to capitalise on a market upcycle, said Kenanga Research.

The research firm is bullish over the prospects of the offshore accommodation services operator, initiating coverage of the share with an "outperform" call ahead of its listing on the Main Market of Bursa Malaysia on April 22.

In its maiden report, Kenanga pegged Keyfield with a valuation of RM1.90 a share, more than double the initial public offering price of 90 sen a share.

The research firm's optimism is underpinned by an expected surge in demand for AWBs in 2024, which it says will surpass that of 2019. This is expected to drive up AWB charter rates.

Kenanga said there is an increase in topside maintenance and hook-up and commissioning (HUC) activities in Malaysia as clients are accelerating their upstream maintenance efforts.

However, there is a persistent deficit in AWB supply as there are only 42 Malaysian-owned AWBs and no announcement of new build vessels.

All this bodes well for Keyfield, which expanded into the OSV industry amid a downturn in 2014, allowing it to enter the OSV vessel ownership market at a lower cost.

"This has enabled it to assemble a young fleet with top-of-the-range specifications at reasonable capital outlays," said Kenanga.

The relative young age of Keyfield's fleet will serve as an operational advantage as newer vessels offer improved fuel efficiency as well as incur lower maintenance costs.

Keyfield's OSV fleet has an age profile averaging eight years, which compares favourably to the industry's 10-year average.

In addition, most of Keyfield's AWBs are equipped with DP2 systems, enabling operation in harsher offshore environments.

"This capability makes Keyfield's OSVs more attractive to potential clients, potentially allowing the company's vessels to command DCRs that are 10-30% higher than industry average in the current market," said Kenanga.

Reviewing its balance sheet, Kenanga said Keyfield is expected to transition from a 0.7x net gearing to a slight net cash position in FY24.

The proceeds of the company's IPO will be used primarily to settle cumulative redeemable non-convertible preference shares (CRNCPS) owed to Lavin Group, a major shareholder, with the remaining funds allocated towards acquiring two vessels, Blooming Wisdom and Helms 1.

According to Kenanga, the financial restructuring is projected to lower the company's finance costs by 64% in FY24, thereby enhancing its bottom line.

It would also provide Keyfield with the flexibility to consider acquiring one or two more vessels in the near to medium term.