Kenanga sees Main-Market bound Keyfield International cashing in on OSV boom, sets target price at RM1.90

KUALA LUMPUR (April 19): Kenanga Investment Bank has initiated coverage on soon-to-be listed oil and gas services firm Keyfield International Bhd at RM1.90 — reflecting a 111% premium over its IPO price of 90 sen per share — while giving it an “outperform” rating.

In a note to clients on Friday, the research firm said Keyfield is poised to cash in on the offshore support vessel (OSV) boom in Malaysia, having embarked on an expansion during the downcycle of the OSV market in 2014 that enabled it to assemble a young fleet with top-of-the-range specifications at reasonable capital outlays.

“We are initiating coverage on Keyfied with a target price of RM1.90, applying a price-earnings ratio (PER) of 11x on its fully diluted FY2025F EPS [earnings per share ending Dec 31, 2025] of 17.3 sen assuming full exercise of employee share option scheme (ESOS). This valuation aligns with the median forward PER of 10.2x observed amongst Malaysian and Singaporean-listed OSV companies during the 2010-2014 upcycle,” it said.

“We attribute the premium of Keyfield’s to the peak cycle industry average due to its higher expected net margins and ROE [return on equity] for its OSV business due to its superior fleet profile,” it added.

Kenanga foresees a surge in demand for accommodation work boats (AWBs) in 2024, surpassing the previous peak in 2019, attributed to the heightened topside maintenance and hook-up and commissioning (HUC) activities in Malaysia, as clients intensify their upstream maintenance initiatives.

Kenanga highlighted that a majority of Keyfield’s AWBs are outfitted with DP2 systems, enabling operations in challenging offshore conditions. This feature renders Keyfield’s OSVs more appealing to potential clients, potentially allowing the company’s vessels to secure daily charter rates that are 10-30% higher than the industry average in the current market.

According to Kenanga, Keyfield is anticipated to undergo a significant financial shift post-IPO, transitioning from a net gearing ratio of 0.7 times to a slight net cash position in FY2024. This was due to the utilisation of IPO proceeds, primarily aimed at settling cumulative redeemable non-convertible preference shares (CRNCPS) owed to Lavin Group, its major shareholder.

The remaining funds will be directed towards the acquisition of two vessels, Blooming Wisdom and Helms 1. This strategic financial restructuring is expected to reduce Keyfield’s finance costs by 64% in FY2024, thereby bolstering its bottom line, said Kenanga.

“Additionally, the improvement in financial health provides Keyfield with the flexibility to consider acquiring one or two more vessels in the near to medium term,” it added.

Keyfield’s IPO was oversubscribed nearly 10 times by the Malaysian public. At an IPO price of 90 sen per share, Keyfield is valued at RM720 million. Keyfield‘s trading debut is scheduled for April 22, after the company raised RM188 million from the second Main Market initial public offering so far this year, following Prolintas Infra Business Trust’s debut on March 25.