This article first appeared in The Edge Malaysia Weekly, on December 28, 2015 - January 3, 2016.

ICON Offshore Bhd, which prides itself on being the largest pure offshore support vessel (OSV) provider in Malaysia, has had a rough voyage since its listing on Bursa Malaysia in June 2014.

Some may blame it on the bad timing of the initial public offer by its controlling shareholder Ekuiti Nasional Bhd (Ekuinas). Its share price tanked shortly after the debut and shed 80.5% from RM1.85 in June 2014 to 36 sen last Tuesday — barely one-fifth of the IPO price of RM1.85.

Those who have a long-term view on the stock seem to think that the share price has reached the floor, barring any unforeseen circumstances.

This nascent optimism stems from the fact that the company has seen signs of improvement operationally in its third quarter ended Sept 30, 2015 (3QFY2015). For one, the utilisation rate of its vessels improved to 61% from 58% in the previous quarter, albeit still lower than 79% a year ago. Meanwhile, its tender success rate also improved to 45%, compared with 33% in the previous quarter.

Icon Offshore chalked up net profit of RM5.53 million in 3QFY2015, an improvement from RM4.57 million in 2QFY2015 but still far less than the RM18.95 million recorded in 3QFY2014.

More importantly, it has a new management. Oil and gas industry veteran Amir Hamzah Azizan will take over the helm as managing director effective March 1 next year.

Amir, son of the late Petronas CEO Tan Sri Azizan Zainul Abidin, will be leaving the national oil company. He is currently CEO of Petronas Lubricants International. He was also at the helm of Petronas Dagangan Bhd and MISC Bhd previously.

His appointment is expected to boost investor confidence, says Maybank Investment Research.

In addition, Captain Hassan Ali has been appointed chief operating officer while Ekuinas CEO Datuk Abdul Rahman Ahmad has been redesignated to executive director from non-executive director previously. Ekuinas has the lion’s share in Icon Offshore, holding a 48.5% stake through its vehicles Hallmark Odyssey Sdn Bhd and Sempena Fokus Sdn Bhd.

“The change in management will definitely help. Before this, it felt as though there was not really anyone in charge of things,” comments an analyst.

Shortly after its debut, Icon Offshore was hit hard by the plunge in global crude oil prices from the peak of US$115 per barrel. By January this year, crude oil prices had more than halved to US$46.59 per barrel. Early this month, they were at around US$36.

As if the weakness in crude oil prices wasn’t bad enough, Icon Offshore suffered another blow in April when its then CEO Dr Jamal Yusof and COO Rahman Yusof were sought by the Malaysian Anti-Corruption Commission to assist in investigations. Until today, the nature of their involvement in the investigations has not been disclosed, but both men have resigned from the company.

The company also had to deal with rumours of falsification of its bollard pull certificates for some of its vessels. It has denied all allegations.

However, the future looks brighter. Maybank Research says in a recent report that Icon Offshore has outperformed its peers in terms of cost management, noting that its OSV peers are in the red despite operating at higher utilisation levels.

“Icon’s ability to cost-down effectively and in a timely manner is commendable, with management having placed emphasis on fuel consumption optimisation, overhead cuts and savings from proactive vessel lay-ups and minimal safe manning, where possible,” says Maybank Research.

An analyst says Petronas’ preference for Malaysian vessel owners will help companies like Icon Offshore. In fact, Maybank Research mentions in its report that the company had secured two charter wins in the third quarter and another three jobs in the fourth quarter at a time when its peers were being hit by early termination of contracts.

“But with crude oil prices hovering around US$40 per barrel, Petronas is having a hard time too. I think they will not be able to assist much unless oil prices rebound. That will be a catalyst for Icon,” opines the analyst.

Looking at Icon Offshore’s balance sheet, short-term borrowings at RM158.76 million is more than five times the amount of cash available at RM29.78 million. The company’s times interest earned stands at only 1.64 times, based on its 3QFY2015 earnings.

According to Maybank Research, Icon Offshore’s balance sheet discipline is evident from its decision to defer delivery of four new OSVs and terminate the purchase of an OSV asset to conserve its cash flow.

“The company planned to embark on a refinancing exercise, but so far, there hasn’t been any firm answer on that aspect. It would be difficult to refinance during such times, when liquidity is shrinking, and I don’t think banks are very keen on refinancing oil and gas companies,” says an analyst.

At its current share price of 36 sen apiece, Icon Offshore is trading at a price-earnings ratio of 4.66 times. The stock has a “buy” and three “hold” calls.

Only time will tell whether the new management will be able to continue turning around the company in an industry that is perceived by some to be overcrowded, at least for now.

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