Alam’s 1QFY12 results were below estimates, mainly due to
the lower contribution from the offshore support vessel as well as underwater
services divisions. Hence, we are downgrading our FY12 earnings by 18% to
factor in the poorer-thanexpected results. Nevertheless, we expect more new
vessel contracts in 2H12, especially as more marginal oilfields and brownfield
services jobs are dished out. Upgrade to Buy from Neutral given that the share price has retraced quite significantly,
but at a lower fair value of RM0.70 (previously RM0.85), based on the existing
PER of 12x FY12 EPS.
Below estimates.
The 1QFY12 results were below consensus and our expectations, making up 10% and
14% of consensus and our FY12 forecasts. Overall, the poorer-thanexpected
results were due to the lower contribution from its offshore support
vessel and underwater services
divisions. The underwater services division
encountered a setback arising from stretched project execution
timelines, which had in turn affected the timing in the recognition of revenue.
Nevertheless, although its 1QFY12 revenue of RM55.3m was 38.2% lower q-o-q, the company still managed to record a net profit of
RM7.4m, which was an improvement
from its break-even position in 4QFY11, during which
it was struggling with forex exchange
losses after selling off its vessels to its associate companies.
More new vessel
contracts seen from 2H12. We think so because we are expecting Petronas to
award the next marginal oilfield contract soon and any predevelopment would require
vessel support services. Also, with the brownfield players expecting more new tenders
to be out for grab soon this year and once they had gotten the contract awards,
there would be budget for them to spend on brownfield activities, including the
use of vessel services. Most of these brownfield contracts, although are new
only when being awarded to new players but they are mostly extension of
existing work done. Hence, all these fast moving activities would benefit the
vessel players like Alam Maritim almost immediately.
Downgrading FY12
earnings by 18%. Despite being bullish on Alam's outlook, we are downgrading
our FY12 earnings to reflect the poorer-than-expected 1QFY12 results. Upgrade
to Buy. As the share price has dropped significantly in tandem with the global market
selldown, we believe that the stock
is looking attractive again.
Hence we are upgrading our call to Buy from Neutral. However, we are
tweaking downwards our fair value
to RM0.70 (previously RM0.85), based on
the existing PER of 12x FY12 EPS,following our earnings downgrade.
Source: OSK
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