Alam Maritim Resources - Secures second installation job this year

-  We maintain BUY on Alam Maritim Resources (Alam), with an unchanged fair value of RM0.85/share, pegged to an unchanged FY12F PE of 12x – at a 25% discount to the oil & gas sector’s 16x. 

-  Alam has secured a contract to install 18-inch pipelines for the SKO OL364 replacement project from SapuraKencana Petroleum. The value of the contract involves a RM50mil lump sum but has two optional scope of works, which could mean an additional revenue of RM8mil. The contract, expected to begin mid-August this year, will last for only a month and is not renewable.

-  We understand that Alam also secured a RM20mil charter for the 1Mas-300 pipelay accommodation work barge from SapuraKencana Petroleum for execute the above contract but this has yet to be announced.

-  Since December last year, Alam has secured two major installation contracts – RM30mil to install offshore modules for Sarawak Shell and US$37mil (RM115mil) from Samsung Engineering to transport, install and precommission two pipelines, two single point moorings and two pipeline end manifold for Sabah Oil & Gas Terminal. Hence, this new contract will be the second installation contract this year for Alam. We maintain FY12F-FY15F earnings as our assumptions have already incorporated fresh installation contracts of RM300mil-RM500mil annually.

-  We are positive on this new award as the earlier contracts enabled the group’s joint-venture with Swiber to turn around to generate associate profit of RM5mil in 2QFY12. Recall that the JV currently employs three barges – the 1Mas-300 pipelay accommodation work barge, Alam 251 and Alam 252. 

-  Management remains optimistic about a turnaround in the OIC division, with the group eyeing additional RM200mil fresh contracts in this segment. Recall that Alam has secured its maiden major offshore installation and construction contract with Samsung worth US$18mil for SOGT last year. 

-  We also expect Alam to be awarded fresh charters for its idling and spot-chartered vessels as global utilisation continues to improve. While we expect offshore support vessels’ day rates to remain relatively flat for the rest of the year, prospects for a pick-up in overseas charter rates next year are improving with the rollout of major projects in Brazil, Africa and Australia.

-  As such, we maintain our view that the company’s earnings recovery is intact, with an undemanding valuation of FY13F PE of 7x – at the lower end of its historical PE band.

Source: AmeSecurities