Norwegian offshore support vessel (OSV) player Siem Offshore could pay dividends in two years after a straightforward debt renewal.
That is the view of investment bank Pareto Securities, which has resumed coverage of the Kristian Siem-backed owner with a “buy” rating.
Day rates are up and vessel owners are rolling over tonnage on to higher-earning contracts, with Siem Offshore no different, Pareto explained.
“The company is well positioned with its diverse fleet, coupled with decent financial and operational leverage,” it added.
The investment bank said refinancing Siem Offshore’s 31 December 2024 debt maturities “appears fairly comfortable in our view.
“The task of an organic refinancing appears uncomplicated with net debt falling to $280m,” the company added.
When this is done, dividends could be back on the menu, Pareto said.
The fleet of 28 OSVs has almost halved since 2014 through sales and is “arguably suboptimal at current,” Pareto added.
But with a backer who is vocal about consolidation, the shipowner could be a vehicle for deals, the investment bank believes.
Siem's Subsea 7 group last month tried to engineer a merger with restructured Oslo-listed OSV player DOF Group, but its bank and bondholder owners preferred to stick with an initial public offering.
No spare capacity
Market tightness varies across the vessel segments, but the outlook combining an increased number of longer fixtures, virtually no spare capacity left in layup and empty orderbooks, is making owners optimistic and demanding of higher rates to recoup the lost return on capital the last eight years have had to offer, Pareto explained.
“The subsea vessel market looks particularly good with fixtures at levels which were good enough to stimulate newbuilding in 2012/13, notably with newbuilding prices moving up a few notches since,” it said.
Two of Siem Offshore’s four subsea vessels are coming off charters in 2024, when Pareto expects day rates in the $60,000s for multi-year deals.
The investment bank is forecasting 2023 Ebitda of $155m.
Pareto’s target price is NOK 28 per share, against NOK 23.45 in Oslo on Tuesday.
“Siem Offshore is not the cheapest OSV player, but with a strong sponsor, good cash flow and manageable leverage, we argue it shouldn’t be either,” the investment bank said.
