Analyst slashes MMA's outlook
Morningstar has slashed its earning expectations for marine services provider MMA Offshore over the next two years because of the oil price slump.
The research organisation yesterday also cut its fair value estimate of MMA's share price from $1.70 to $1.
It has an accumulate recommendation on the stock, which closed down 1.5� at 71.5� yesterday.
Formerly known as Mermaid Marine Australia, the share price of the contractor has fallen 42 per cent this year because of the shadow over the oil and gas industry.
Morningstar cut its earnings estimate for MMA by 20 per cent for fiscal 2016 and 25 per cent for the following year over the price falls and receding LNG project work.
"MMA Offshore's order book for 2016 and 2017 is dependent on the company winning Gorgon production contracts to replace the significant amount of construction work it has performed during the past two to three years," Morningstar analysts said.
"We note the production phase of Gorgon is lower-margin and less fleet intensive (and this will) increase downside risk to earnings."
The analysts said MMA's expansion into Asia through last year's $550 million Jaya acquisition now appeared to have been poorly timed.
"Fleet utilisation levels and day rates are currently under pressure in South-East Asia as a result of intense competition," they said.
Morningstar's falls near the lower end of broker price targets for MMA, which range from 87¢ to $1.50.
