Maridive and Oil Services in Egypt downgraded

Maridive and Oil Services, an Egyptian marine and oil support services company, had its share price estimate cut and assigned a "hold" recommendation at Pharos Holding.

"The absence of earnings visibility beyond 2012 may impose an overhang on the share price in the short-term," George Beshara, an analyst based in Cairo, wrote in a note to clients yesterday. He reduced the price estimate to US$3.45 from $3.70.

The company reported a net profit of $27.4 million, missing Mr Beshara's estimates of $85.2m due to the extra costs related to the newly procured support vessels that recently joined Maridive's fleet. A slowdown in the offshore construction services segment due to the impact of the monsoon season on a $117m Indian-subcontinent project with the Indian state-owned Oil and Natural Gas Corporation also contributed to the profit decline. The project, to be completed by the middle of next year, has been on hold since May.

Maridive has not yet managed to win a major contract since, Mr Beshara said.

As of June, Maridive's construction backlog consisted of two contracts with a total value of $442.8m. A Saudi Aramco contract will be completed by the end of this year.

The analyst is sceptical on the flow of contracts from within the Middle East and North Africa region, given the current political turmoil.

"Offshore construction services are long-term in nature and the current political situation might lead exploration and production companies to shelve large and long-term expenditure in the region, at least throughout this year," Mr Beshara said.

Maridive shareholders will not reap the full benefits of the existing backlog because of the presence of minorities.

About 80 per cent of the backlog is executed by Valentine, a UAE company that is 75 per cent owned by Maridive. As a result, Maridive shareholders will not reap the benefits of cash flows over the coming 12 months. This has already been evident in results over the past two quarters.

halsayegh@thenational.ae