News The
company announced that it had secured sales for another 4 vessels with an
aggregate value of approximately RM141m.
The 4 vessels
consisted of one 300-Men Accommodation Work Barge, one Anchor Handling Tug
Supply (AHTS) and two low-end vessels.
The vessels are
expected to be delivered in 2012-2013.
Comments We are
positive on the news as the company is still securing orders for new
vessels.
There was no guidance
in regard to margins and the split for the delivery timelines, but the company announced
that its current orders now stand at RM711m.
This is more than the
FY11 year-end order book which stood then at RM610m. However, the trend should
moderate as deliveries are recognised within the year.
Outlook Net
profit margin has been guided to be more modest at around 15%-25% from FY12E
onwards (vs. 25%-34.9% in past 5 years) due to the normalisation of market
conditions for the shipbuilding industry in
the region.
Its forays into
different businesses like 1) fabrication and engineering and 2) FPSO and FSO
have yet to take off.
Management is still
actively looking out for opportunities to diversify its sources of
earnings.
Forecast We are
maintaining our earnings estimates at this juncture given that we have already
imputed for some new order wins (12 AHTS and 20 tugs and barges) for FY12.
The company’s 2QFY12
result is expected to be released on 27th August 2012.
Catalysts to raise
our forward estimates will be if the current year-end order book is
significantly above that of last year.
Rating MAINTAIN OUTPERFORM
Valuation Our
unchanged target price of RM2.53 is based on a targeted PER of 7.5x on FY13 EPS
of 33.7sen.
Risks 1) Continued
sluggish orders and margin erosion, and 2) inability to gain new forms of
business.
Source: Kenanga
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