A study of Offshore Support Vessel Industry - Part II

I learned a lot by reading recent Bumi Armanda IPO exercise. I will extract some of the key points:

We are sitting in a nice spot because Malaysia and Indonesia plan to spend a considerable amount of capex from 2011-2015.


The capex will continue to climb for the next two years and expect to peak out in 2014.

Petronas is going to be the key driver in Malaysia as they are trying to spend more money in marginal oilfield and brownfield under the Economic Transformation Program(ETP). Petronas plans to spend about RM 60 billion in exploration and production activities. This is largely positive but most analysts would expect results can only be seen by the end of 2012 to mid 2013.

The following matrix shows the competitiveness of various players. A few of players are listed in our stock exchange.



Most of them are regional players except Bumi Armanda has been able to compete very effectively globally. One of the names that I did not see is Alam Maritim. Not sure why though because their revenue can easily surpass Tanjong Offshore.

Most of the Malaysian OSV operators are lucky because of Cabotage laws that prioritize the local players. That's why the rates was a lot better compared to international markets. I'm not sure whether this is a good thing or bad because we are protected again. Anyway, I think it is too early to take about liberalization. The implication of liberalization or reform means consolidation that surely will spice up the market a bit hot with M&A rumors.

The industry utilization is improving, most should be operating around 80% now. Unless we have another round of full-fledged global great recession, we should see better prospects ahead. The only issue left is whether investment sentiment will improve towards these counters despite of more stable outlook.

The big picture seems to be okay that worth while to investigate further on the micro-level(stock picking).