Extract fm DBSVickers Report,

CHO’s earnings outlook is attractive, driven by another six vessel deliveries over the next 30 months. Tonnage operated is expected to rise 16% and 22% over FY06-07F. Balance sheet remains robust with a projected net gearing position of only 14% in FY07F, giving CHO room to expand its vessel fleet further. In addition, effective October, Scomi Marine is a 29% shareholder, which we believe will result in additional growth opportunities. Maintain Buy with a target price of S$0.58. CHO shares are currently trading cum dividend of 1.5 cents.

• Fleet expansion and renewal underway. CHO currently operates 21 vessels including one that is 50%-owned and another that was delivered in July 05. Based on its current delivery schedule for another six vessels over the next 30 months, its fleet size will expand from 20 as at end FY05 to 23 by FY06F, 25 by FY07F and 27 by FY08F. Tonnage operated will rise by 16%, 22% and 18% over FY05-08 as newbuild deliveries in FY07 are for the larger AHTS vessels. Charter rates have been firm at US$1.10-1.20/bhp per day. There is potential for rates to move up with new rig fixtures expected next year.
  
• New shareholder comes on board. Effective October, Scomi Marine (previously known as Habib) comes on board with a 29% stake in CHO. Parent Chuan Hup’s stake now stands at 23%, down from 52%.
  
• Some volatility in quarterly earnings expected. In 1QFY06, two vessels underwent Special Surveys. Another two are scheduled for 2Q06 and another one for the 4Q06. We expect revenue and net profit to be hit by loss of charter-hire revenue from these vessels as well as Special Survey costs. Therefore, 1Q06 and 2Q06 earnings are likely to be lower than 4Q05 earnings. However, 2H earnings should be stronger compared to 1H given the absence of Special Survey and full six-month contribution from three new build deliveries. Our target price is S$0.58, and this is based on 15x FY06 earnings. Maintain Buy.