Alam’s FY11 results came in below expectations, largely due to
the lower contribution from its offshore support vessels as a result of
the monsoon season, higher other operating expenses and inferior contribution from its underwater
services/offshore installation and construction. Nevertheless, we are expecting
Alam’s business prospects to improve in FY12 on the back of higher demand for vessel
services from marginal oilfield and brownfield services. Maintain Neutral with an unchanged FV of
RM0.85 based on existing PER of 12x FY12 EPS.
Underperformance.
The FY11 results were below consensus and our expectations making up 30% and
50% of the respective FY11 forecasts.
Overall, the disappointment arose from lower ontribution from its offshore
support vessels which were affected by the monsoon season, higher other
operating expenses and lower contribution from its underwater services/offshore
installation and construction. All these factors caused its 4QFY11 bottomline to sink into a
net loss of RM0.7m, a significant drop from a net profit of RM13.4m in 3QFY11.
Nevertheless, on a y-o-y comparison, the full-year
FY11 performance turned out to be
better, lifted by a stronger 2Q and 3Q, while its FY10 performance was affected
by the one-off Vastalux provision in 4QFY10.
Better prospects
expected in FY12 onwards. Given that marginal oilfield and brownfield services
should start to see heightened
activities in FY12 onwards considering
the planned capex to be rolled out by Petronas and its PSC contractors, we are
expecting the demand for offshore support vessels to improve moving forward and
this would definitely benefit Alam’s vessels from the standpoint of more
attractive charter rates and longerterm contracts. We are expecting its utilization rate to
progressively improve and be consistent at 70%-80% compared to the situation in
FY11, during which its utilization rate swung from 50% to 80% within weeks due
to the spot charter for some of its vessels.
Maintain Neutral. Our fair value for Alam remains unchanged at
RM0.85 based on existing PER of 12x FY12 EPS. Although we are positive
of the company’s future prospects,
we are keeping our call and PE valuation unchanged for now until we see the positive industry
developments filter down to Alam’s earnings. Hence, we
maintain our Neutral call for
now.
Source: OSK188
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