Alam Maritim Resources - 2Q12 within expectations

Period    2Q12/1H12

Actual vs. Expectations

 Alam Maritim Resources (“ALAM”) reported 2Q12 net earnings of RM16.1m which were within expectations.

 This brought its 1H12 net earnings to RM23.5m, which accounted for 40% and 44% of ours and the street’s FY12 full-year estimates respectively. 

Dividends   No dividend was declared as expected. 

Key Results Highlights

 QoQ, the net profit jumped 119% to RM16.1m from RM7.4m, led by stronger profit contributions from both business divisions of Offshore Support Vessels (OSV) and Underwater Services (US). 

 The commendable set of 2Q12 results were also illustrated by the strong QoQ revenue growth of 196% to RM163.4m from RM55.3m in the preceding quarter. This was due solely to the two major contracts awarded to ALAM namely SOGT (awarded by Samsung Engineering S/B) and MOFTI (secured from Sarawak Shell Bhd) for its US division.

 The 1H12 net incomes improved significantly to RM23.5m from just RM0.2m a year ago as ALAM reported a net loss RM6.8m in 1Q11. 

 The 1H12 revenue soared by 113% to RM218.7m from RM102.6m in 1H11, attributable to its US segment. However, OSV segment reported a revenue which dipped by 3.6% partly due to lower revenue derived from third party vessels.

Outlook   We remain positive on the company as we expect a strong 2H12 on the back of 1) an assumed healthy vessels utilisation rate of 80% for the OSV division and 2) execution of the remaining RM10m from the RM20m SOGT project in the US segment which is now 70% completed.

Change to Forecasts

 We continue to maintain our FY13E-FY14E estimates with our assumptions of an 80% utilisation rate and RM400m in annual replenishment jobs. 

Rating  MAINTAIN OUTPERFORM

Valuation    At an unchanged targeted PER of 10x on FY13 EPS of 11.4sen, we are maintaining our target price at RM1.14 and OUTPERFORM call on ALAM.

Risks   1) Lower than expected OSV utilisation,  2) Further delay in the SOGT project, which will skew our 2HFY12 estimate and  3) Low rate of project replenishment from 2013 onwards, which will put our forward earnings at risk.  

Source: Kenanga