Full steam ahead for M’sian OSV market
KUCHING: The Malaysian offshore support vessel (OSV) market is expected to sustain its robust growth further into 2024 and beyond, propelled by increased activities and a prevailing vessel supply shortage.
Analysts at Kenanga Investment Bank Bhd (Kenanga Research) recently shared this view in an initiation report for OSV player Icon Offshore Bhd (Icon).
According to Kenanga Research, Petroleum Nasional Bhd (Petronas) had forecasted a higher demand for OSVs in 2024 which aligns with recent increased drilling activities.
“The OSV market is strengthening, evidenced by a daily charter rate (DCR) rise of 8 to 10 per cent year on year (y-o-y) in 2023,” said the research arm.
And with no new vessels being built by local players since 2014 due to financing constraints, the analyst is also anticipating the current supply crunch to continue which should support a sustained DCR uptrend from 2024 onwards.
“This is further supported by strong demand from the Middle East and West Africa markets,” they added. For 2024 and 2025, Kenanga Research is forecasting respective average DCRs of RM49,000 and RM52,600.
With a rosy demand outlook and growing DCRs in the OSV market, Kenanga Research guides that players may expect to register explosive earnings growth in the near to mediumterm.
Icon for one will be one of the main beneficiaries of the growing DCRs are the research arm notes that 11 of its OSVs will have their contracts set to end in the first half of the year (1H24) and are expected to be renewed at higher spot market rates.
The research arm added that the group’s balanced fleet of AHTS and PSVs with an average age of 14 years is also wellpositioned to benefit from the tightening of the OSV market.
“It is reactivating two laidup AHTS vessels in response to market demand, with one expected to return to service in the next two months and the other later on, enhancing earnings from 2HFY24 onwards.
“Given the challenges in acquiring new vessels, stemming from financing constraints and a scarcity of global yard capacity, Icon’s position is notably advantageous. The company operates a fleet of OSVs that still has considerably extended operational life spans,” it explained.
To meet the increased market demand for OSVs, Icon is reactivating two of its laid-up AHTS vessels which are expected to enhance its earnings from 2HFY24 onwards.