Renaissance Services (RNS) reported weaker-than-estimated 1Q2016 net profit after minority interest of OMR0.44 million (versus net loss of OMR0.7mn in 1Q15, net loss of OMR29.5mn in 4Q15), came in 41% below our estimate (but only a difference of OMR0.3 million in value). The company reported operating profit of OMR11.9 million (+9% Y-o-Y, -4% Q-o-Q, +9% vs. EFGe). Revenue came in at OMR56.3 million during the quarter (-4% Y-o-Y, -6% Q-o-Q) and came in 3% below EFG estimate. RNS reported stronger-than-expected group level operating margin of 21.1% (+240bps Y-o-Y, +50bps Q-o-Q, +240bps EFGe), which we believe could be due to better-than-expected vessel utilisation level and/or cost control measures - leading to operational beat.   Our view: Overall, a decent set of operational figures. We are estimating 13% decline in FY2016 operational profit Y-o-Y, which would be challenged by the better-than-estimated operational figures. However, its operational performance did not filter through to its parent company due to higher tax and minority shares, which could overhang on its equity valuation. Our key immediate concern on RNS are i) Even though oil price recovered from its early lows, the price is still 55% below when RNS commenced most of its long-term contract, which would challenge its long-term contract day rates in 2016 and beyond (recently renewed BP contract with a 9% contract cut - we estimate 8% in dip in 2016 day rate on average); ii) the equity dilution from the Mandatory Convertible Bonds (worth OMR2.7 million in August 2016); and iii) any further provisioning on its Topaz assets or its derivatives liabilities. The share price has rallied c27% over the past month - along with the oil price recovery – and now trades 37% above our FV. (Sameer Kattiparambil, Company)