Offshore energy sector must make way for Jaya

It's about to rake in 7-10 orders worth EUR70-150m.

According to DBS, Jaya has repositioned itself as a services provider to the offshore energy sector. Its core focus on chartering ensures a higher level of recurring income, while a move away from speculative shipbuilding would reduce earnings volatility.

Here's more from DBS:

This could see both parties collaborating to build IHC’s high specification offshore vessels at Jaya’s yards. Securing such orders would propel Jaya up the value chain and enable it to leapfrog its regional competitors.

Indeed, recent media reports indicate that IHC-Jaya is in talks with several parties for potentially 7-10 orders worth EUR70-150m each.

We believe Jaya’s earnings troughed in FY12 as the group transitioned to its new business model. Despite fewer expected vessel sales/disposals, we project FY12-14F EPS CAGR of 54%, driven primarily by the Offshore Support division on a larger fleet, improved day rates, and better margins.

There is upside potential to our numbers as we have not assumed new vessel orders. With a clearer focus and less volatile earnings, we believe Jaya now offers a more attractive investment opportunity.

We see a potential re-rating of the stock towards its book value on a strong 86% recovery in FY13 earnings. The potential award of high-value newbuild orders and resumption of dividend payments following the refinancing of its scheme debt are likely catalysts.