KUALA LUMPUR (Oct 22): TAS Offshore Bhd saw its net profit soar 60% to RM8.73 million for the first quarter ended Aug 31, 2015, from RM5.45 million in the previous year, due to foreign exchange gains.

However, the company's 1Q revenue dropped 1% to RM75.5 million from RM76.3 million a year ago, according to its filing on Bursa Malaysia today.

The increase in profit was due to the gain on foreign exchange recorded during the current quarter as the US dollar and Singapore dollar strengthened, said the company.

The company expects the demand for both platform support vessels and anchor handling tug supply vessels to remain weak in the short term, but it remains cautiously optimistic in the long term that oil price will recover.

It said the unwillingness of oil producing nations to reduce their production, coupled with the impending return of Iran to the oil market and a lower global demand for oil, has resulted in a glut of oil supply and the current depressing oil price of about US$50 per barrel.

As the offshore support vessel (OSV) market depends highly on the price of oil, it said the drastic fall in oil price since the second half of 2014 had caused most oil majors to scale down their capital expenditures and also exploration and production activities.

This has resulted in the reduction in demand for the OSV and lower charter rates. The number of oil rigs being deployed had also fallen substantially and this had affected the demand for anchor handling tug supply vessels, it added.

"Thus, in the short term, the demand for both platform support vessels and anchor handling tug supply vessels [will] remain weak and we foresee that it will take some time for the demand of these vessels to return," it said.

Yet, in the long term, TAS expects the oil price to recover due to the increase in demand for energy when industrial activities increase in tandem with population growth.

"We are cautiously optimistic that in the long term outlook the demands for both the offshore support vessels with higher technical specifications suitable for deep sea operation and offshore support vessels for the Enhanced Oil Recovery projects, which allow optimum extraction of oil resources, will return," it said.

TAS shares closed 1 sen or 1.92% down at 51 sen today for a market capitalisation of RM91.3 million.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)