The share price of
ALAM has rallied strongly by 45% from RM0.50 in Aug after it announced a
commendable set of 2Q12 results. ALAM is
expected to release its 9M12 results in mid-Nov with a flattish QoQ net income
growth at c.RM15m for 3Q12. Yesterday, ALAM continued to show its ability to
secure contracts as it bagged a new RM22m AHTS contract. Nonetheless, we have
trimmed FY12E earnings by 7% due to an expected lower margin from SOGT and a
loss of RM1m-RM3m from its Subsea division in 3Q12. We have also cut FY13-FY14 EPS by 15%-20% after the company
lost a contract to SKPETRO last week. As a result, our new price target is now RM0.92/share,
based on an unchanged CY13 PER of 10x. Even then, this implies a potential
upside of 28% from its current price. As such, we remain positive on ALAM and
continue to rate it as an OUTPERFORM.
Bags first chartered
contract for 2013. The company announced yesterday that its wholly-owned
subsidiary, Alam Maritim (M) Sdn Bhd, had won a charter contract from Carigali
Hess Operating Company Sdn Bhd for the provision of one unit of 5,150bhp AHTS.
This valued the contract at USD7.04m (c.RM21.5m), which has a tenure of 21
months with no extension and is expected to commence in Mar 2013 and to be completed
in Dec 2014. We are positive on the contract win as the daily charter rate
(DCR) is USD11k or USD2.17/bhp. This DCR is considered attractive as compared
to the usual DCR of USD1.80/bhp for a similar vessel. We understand that
management is looking to announce at least two more charter contracts with a
total value of RM48.5m before the end of this year.
A contract lost to
SKPETRO. Last week, SapuraKencana Petroleum Bhd (“SKPETRO”, OP;
TP: RM3.42) announced that its subsidiary won the Inspection, Repair and
Maintenance (IRM) contract worth RM700m from Petronas Carigali. We understand
this is the same project that ALAM was vying for to provide some earnings
stability to its underwater services unit. All is not lost, however, as we
believe that ALAM could be a sub-contractor for works to SKPETRO, where we foresee
a rental income here for ALAM’s diving assets. However, the company is still
busy with other IRM contracts bidding as well, with each contract value ranging
from RM200m-RM300m.
Expecting a flattish
3Q12 results. The company has scheduled to announce its 3Q12 results in two
weeks’ time. It expects to post a flattish net profit of RM15m in 3Q12,
bringing the YTD 9M12 net earnings to
RM35m-RM40m that will make up 60% of our previous FY12E estimate of RM58.7m.
The main earnings contributor will be its OSV segment due to higher charter
rates and improved vessels utilisation rates. However, its underwater segment
is still making a loss from an unexpected cost overrun incurred due to delays
in its SOGT project execution from the clients’ end. As such, this has led us to trim our FY12E estimates by 7.5% to
RM54.3m from RM58.7m previously.
Source: Kenanga
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