- Pacific Radiance's 1H25 revenue was below expectations at 37% of FY25e forecast but adjusted PATMI was a large beat at 81%. Gross margins were higher than expected, due to a larger contribution from chartering revenue.
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- The three new vessels (accommodation barge, workboat, AHTS) deployed supported growth in 1H25 ship chartering and management revenue. Demand remains robust for offshore support vessels (OSVs) due to production targets in the Middle East, demand from Asian offshore wind deployment, and the limited number of vessels ordered.
The Positive
Margin expansion.
- Gross margins expanded 16% points y-o-y to 49%. A higher contribution from ship chartering income at attractive rates drove margins.
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The Negative
- Nil.
Outlook
- We believe Pacific Radiance has hit steady state in earnings. The key vessel, accommodation barge Crest Station 1, has locked in multi year contracts in the UAE. Growth will be muted without the acquisition of new vessels or the revival of laid-up vessels. In 2H25, we expected a contribution from the completion and sale of two CTVs (crew transfer vessels).
- Demand for CTVs remains healthy, although a lull may occur in Taiwan due to the delayed construction of offshore wind farms. However, demand is expected to resume from 2027, with demand from South Korea serving as an added driver. Ship repair demand is healthy with the ageing of OSVs globally.
- Higher charter rates from AHTS and workboats could support growth in 2026.
Maintain BUY with higher target price of S$0.098.
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