Friday 9 November 2012

Alam Maritim Resources - OSV Intact But Cautious on The Rest


We caught up with Alam Maritim’s (Alam) management recently for a regular update. Overall, we expect the company’s 3Q12 results to be in line with our estimates, largely due to the recovery in its OSV business, but we are cautious on its OIC and marine businesses. FY12 numbers would likely be within expectations and in line with our FY12 target of RM42.9m. All in all, we are maintaining our FV at RM1.25, pegging the stock to 12x FY13 EPS.

Recovery of OSV business intact. We are positive on the prospects of Alam’s offshore support vessel (OSV) business, buoyed by more contracts to be clinched in the near term. To date, it has secured RM483.1m worth of jobs – RM127.7m for its offshore installation and construction (OIC) business and RM355.4m for its OSV business. Charter rates for its recent contracts have been stable at USD1.8-USD2.1 per bhp and management believes that the rates should be stable at current levels in 2013 as well.

3Q12 results to be better y-o-y. We believe that Alam could deliver RM14m-RM16m in earnings for 3Q12, which is about 3%-17% above 3Q11’s net profit of RM13.6m. The stronger y-o-y earnings will most likely be underpinned by steady vessel utilization and charter rates. Also, the existing project awarded by Samsung Engineering and Shell to its OIC division should continue to contribute positively to its bottom line in the next two quarters.
Cautious on OIC and marine. The company has some RM220m worth of OIC jobs in its orderbook, which will dwindle significantly by 1H13. Hence, if Alam is unable to secure any other contracts for OIC and marine divisions anytime soon, losses from these two businesses will offset the earnings recovery from its OSV division, which may prompt us to revise our FY13f earnings downwards.

Maintain BUY. We remain positive on the recovery of Alam's OSV business for 2013, which would contribute positively to the group’s bottom-line, but remain cautious on its OIC and subsea businesses due to the lack of any contracts to keep both divisions afloat at this point in time. We are maintaining our FV at RM1.25, pegged to 12x FY13 EPS but may revise our earnings forecasts for FY13 downwards, if the company is unable to secure any new contracts for its OIC and marine businesses anytime soon.
Source: OSK

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