THE BUZZ
Alam announced yesterday that its 100%-owned subsidiary, Alam Maritim (M) SB, has accepted the award from a local oil & gas company to provide one workboat. The contract is for a primary period of one year, with an extension option exercisable by its client for another twelve months.
OUR TAKE
A RM69.2m contract. We understand that the contract is valued at RM69.2m assuming that Alam’s client engages the workboat for the full duration, inclusive of the optional period. However, we make no changes to our FY12-13 estimates as we had earlier assumed some job replenishments for the company’s vessels.
Operational risks a major concern. The risks associated with the contract are mainly operational, such as accidents and the unexpected breakdown of vessels. In mitigating them, the company developed a programme maintenance schedule which stringently adheres to the International Safety Management (ISM) Standards in maintaining the performance and seaworthiness of all its vessels.
More jobs in the pipeline. We expect more projects to be handed out to Alam in the next six months. To recap, Petronas and its PSC contractors who are focusing on marginal oilfield, enhanced oil recovery and brownfield services dished out tenders worth RM8bn-10bn. Besides Dayang (BUY FV RM2.75) and Petra Energy (BUY FV RM1.94), Alam could benefit from these tenders as its other anchor handling tug supply (AHTS) vessels as well as supply and utility vessels would be put to further use when these projects are handed out.
Maintain BUY. As stock has underperformed the broad market in the last 12 months, we believe that it is trading at an attractive valuation of merely 5.3x FY13 EPS. Investors may opt to accumulate, in view of its weak share price. All in all, we are maintaining our FV at RM0.97, pegged to an existing 12x of its 12-months forward earnings.
Source: OSK
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