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Oil price rally sends shares of OSV operators surging

The Business Times by ANNABETH LEOW

Singapore

OFFSHORE supply vessel (OSV) operators have seen a marked recovery in their shares amid the recent oil price rally, according to a Singapore Exchange (SGX) report on Wednesday.

The 29 OSV stocks trading here notched an average price rebound of 67.4 per cent from their 52-week lows, according to data shared with The Business Times. Six other counters are suspended from trading.

Such companies are seen as key beneficiaries of an oil recovery, the SGX said on its "My Gateway" investor education portal.

Brent crude is up by about 27 per cent in the year to date, on concerns over a supply shortage.

"A robust demand for oil leads to an increase in planned exploration and production activities, resulting in higher demand for rigs, platforms and production, storage and offloading units, which in turn boosts the OSV market," said the report.

The 29 stocks, which have a combined market value of S$2.38 billion, saw an average negative total return of 5.4 per cent in the third quarter.

But the share price surges have been especially dramatic for the smaller-capitalised OSV companies.

For instance, Teho International, which has a market value of some S$9.8 million, swung up by 950 per cent from a low of 0.4 Singapore cent, to 4.2 Singapore cents as at Sept 28.

KS Energy, which is worth S$17.4 million on the market, saw shares recover by 207.7 per cent to S$0.04.

The price change was more moderate, but no less marked, for the larger offshore vessel service providers.

The 10 biggest stocks by market capitalisation - which are worth about S$1.81 billion altogether - saw prices improve from one-year troughs by 13.3 per cent, on average.

Vallianz Holdings led the pack at 28.6 per cent, while Mermaid Maritime gained 21.4 per cent, Sinwa was up by 21.1 per cent, Dyna-Mac Holdings added 18 per cent and PACC Offshore Services rose by 17.4 per cent.

This is even as companies continue to struggle with delivering value to their shareholders. Vallianz had a negative total return of 18.2 per cent in the July-to-September period, for instance, while PACC Offshore's returns were down by 11.6 per cent.

Still, UOB Kay Hian analyst Foo Zhiwei, who covers oil and gas stocks, told BT on the phone that he has no small-to-mid-cap picks in the OSV space.

"While the oil price has gone up and oil majors have been making a lot of money, they haven't shared the upside with their suppliers. The OSV players continue to suffer," he said. "With interest expenses still high for most offshore marine firms, I think it will be a hard struggle for them."

But he added that the gloom could perhaps lift next year, if suppliers consolidate or work together to drive up prices, as clients are already budgeting for higher capital expenditure.