Is POSH’s US$131m loss the start of a downward spiral?

Its financial strength will be a key factor.

Though operating conditions staggered PACC Offshore (POSH) in 2015, analysts remain upbeat that the company’s financial strength will allow it to survive the sustained O&G downturn.

Maybank Kim Eng stated in a report that among all oil services stocks it covers, POSH has the least balance sheet risk. Its FY15 net gearing is only 0.5x; it bagged US$1b of loan facilities in January 2016 at a <2% interest rate where US$462m loans have tenures of five to seven years; it has only US$161m of outstanding capex commitment with US$117m to be paid in FY16; and it’s looking to save another US$10m from cost cuttings in FY16.

On top of all this, its free cash flow is expected pick up significantly from FY17 as well.

The report asserts that POSH’s robust financial strength further evidences that the company will be able to ride out the downturn and even emerge with stronger market share. Currently, the company continues to seek jobs and just recently won a contract to tow Shell’s Prelude FLNG, and established a Saudi Arabia JV to focus on the Middle East market.

Maybank adds that a privatisation by POSH’s parent company cannot be ruled out while downside risk is limited with the stock at historical low.