Recently acquired offshore support vessels are set to drive strong profit growth at Singapore offshore company Atlantic Navigation, say analysts.
The Middle East-focused company saw Ebitda margins recover strongly after Covid-19 on the back of higher charter rates and sustained higher utilisation rates.
“Earnings growth in 2024 should be underpinned by full-year contributions from newly acquired vessels as well as the completion of a newbuild vessel in the second quarter of 2024,” said UOB Kay Hian.
These include an accommodation workboat acquired in the first quarter of 2024, a DP2-rated platform supply vessel acquired in April 2023 and a maintenance utility vessel acquired the following month.
In addition, the second quarter of 2024 will see the completion of the AOS Glory, a large 6,000-bhp DP2-rated multipurpose PSV newbuilding.
In 2023, Atlantic Navigation saw revenue and net profit increase 40% year on year to $91m and 62% year on year to $18.1m, respectively.
This was driven by growth across both its business segments — marine logistics services, with its fleet of 20 vessels providing ship chartering, technical and chartering project management; and ship repair, fabrication and other marine services in the Hamriyah Free Zone as well as Dubai Maritime City.
In the first quarter of this year, Ebitda margins expanded further to 42.1% versus 37.4% in 2023 and levels of 20% to 26% seen in the period 2019/2021.
“The company attributed this to higher vessel charter rates as the Middle East’s offshore marine demand/supply dynamics appear to be very favourable for the foreseeable future, as well as good cost control,” said UOB Kay Hian.
“At a recent conference call with the company, it appeared very confident that the Ebitda margin can be maintained at greater than 40% for 2024, helped by higher charter and utilisation rates.”
At the end of the first quarter, Atlantic Navigation had a net gearing of 40.7%, a slight increase from the 38% seen at the end of 2023.
“We note that Atlantic Navigation has managed to lower its gearing from 57% in 2018 to current levels, which should allow it to add another two to three vessels for its medium-term growth,” said UOB Kay Hian.
“Given its presence in the Middle East, the company has not had issues in accessing financing for its acquisitions.”
Looking ahead, Atlantic Navigation’s management has guided strong profit growth for 2024/2025, driven by higher day rates as old contracts roll over and new contracts commence.
“Industry expectations for oil prices in excess of $80 per barrel levels should underpin this growth,” according to UOB Kay Hian.
“Nearly 49% of Atlantic Navigation’s revenue came from Qatar, making it a second derivative play on the world’s fastest-growing LNG exporting nation,” the investment house added.
Clarksons says OSV day rates have continued to perform strongly this year, with increasingly broad-based demand across regions and minimal supply expansion.
The broker’s rate index for anchor-handling tug supply vessels is up 26% year on year, and its PSV index is up 22%, now above the mid-2008 peak.
Clarksons says both markets are well above 2014 peaks with broad regional increases showing no sign of losing momentum this year.
