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Saturday, December 22, 2012

DBSV reinstates Jaya Holdings at Buy, $0.85 target


FRIDAY, 21 DECEMBER 2012 14:57

DBS Vickers reinstates Jaya Holdings (J10.SG) at Buy with a $0.85 target.

“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.”
It notes Jaya repositioned as a service-provider for the offshore energy sector, with a focus on chartering ensuring higher recurring income and a move away from speculative shipbuilding reducing earnings volatility.

It views Jaya’s strategic alliance with IHC Merwede as a potential game-changer as the two could collaborate to build IHC’s high-specification offshore vessels at Jaya’s yards, which would propel Jaya up the value chain, leapfrogging regional competitors.

The house expects FY12-14 EPS CAGR of 54%, primarily on the offshore-support division on a larger fleet, improved day rates and better margins. “We see positive catalysts from potential high-value newbuild orders and possible resumption of dividend payments.” It views current valuations as undemanding at 0.7x FY12 P/BV vs its 1.1x five-year historical average. The stock is up 3.4% at $0.605.

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