Alam Maritim Resources - OUTPERFORM - 23 May 2012

Period    1Q12

Actual vs. Expectations

 Alam Maritim Resources’ (“ALAM”) 1Q12 net earnings of RM7.4m accounted for only 14% of our FY12 full year estimate (13% that of the market consensus). However, we consider this to be within expectation as we are expecting a strong 2H. Note that 1Q is seasonally a weaker quarter due to the monsoon season.

Dividends   No dividend was declared in this quarter as expected.

Key Results Highlights

 QoQ, ALAM turned profitable in 1Q12 from a net loss of RM0.7m in 4Q11 as the preceding quarter’s results was impacted by a RM13.0m in impairment losses.  

 In fact, 1Q12 revenue dipped by 38% QoQ to RM55.3 from RM89.5m in the preceding quarter, due to weaker sales especially from the Underwater Services (US) segment where the revenue deteriorated by 70% to RM5.0m from RM16.9m, with an operating loss of RM1.1m. 

 YoY, ALAM returned to the black in 1Q12 from a net loss RM6.8m a year ago. This was on the back of a turnaround in Offshore Marine Services (OMS) where its turnover improved significantly as third party vessels generated higher revenue of c.RM20.0m, coupled with a healthier utilisation rate of 80% and with charter rate remaining at USD1.80-USD2.20.

 In addition, the company’s associates and joint controlled entities contributed positive earnings of RM5.8m compared to a loss making position of RM1.0m a year ago.

Outlook   We are looking to a strong 2H12 as ALAM is expected to secure four more contracts in the next one month.

 We understand that the upcoming contracts come with better rates, which should help to improve the profit margin further.  

Change to Forecasts

 Maintaining our FY12-14E net earnings of RM56.3m-RM76.7m.  

Rating  MAINTAIN OUTPERFORM

Valuation    We are rolling over our valuation base to CY13 from CY12, thus our new price target is now RM1.00 (from RM1.04) based on 12.0x PER. As such, we are keeping our OUTPERFORM call unchanged.

Risks   Delays in project executions. 

 Unforeseen unfavourable vessels utilisation rate and a lower daily charter rate.

Source: Kenanga