THE BUZZ
Alam Maritim’s (Alam) jointly controlled entity, Alam Maritim (M) SB has received a letter of award from Carigali Hess Operating Company for the provision of one unit of anchor handling tug supply vessel (AHTS).
OUR TAKE
Positive but no change to our earnings forecast. The contract is valued at approximately USD7.04m (RM21.5m) and will commence in March 2013 for a period of 21 months, with no specific provision for an extension. We understand that the AHTS, which is chartered out at a rate of USD11k-USD12k per day is one of Alam’s jointly-owned offshore support vessels (OSVs), which would boost its associate earnings next year. That said, we make no change to our earnings forecast as we have previously assumed some orderbook replenishment for its jointly-owned vessels next year.
Cautious on OIC and subsea. We believe Alam’s OSV business would continue to drive the group’s earnings growth next year. We continue to believe that the group’s turnaround prospects is intact and it is set to achieve a PAT of some RM42.9m, based on our estimates. Our only concern lies within its offshore installation and construction (OIC) and subsea businesses, where its current orderbook of RM220m would dwindle significantly next year. The high burn rate of RM2.5m-RM3m per month for its OIC business and RM1m-RM1.5m per month for its subsea business could offset the positive contributions from its OSV business.
Maintain BUY. All in, we are positive on Alam’s OSV division, which we expect to bag a few more contracts in the near term. We thereby reiterate our BUY recommendation on Alam and value the stock at RM1.25, pegged to 12x FY13 EPS. Our fair value implies a return of 76.1%. Key downside risks include: i) the failure to secure new contracts for its subsea and OIC businesses, and ii) intense competition in the OSV segment causing charter rates to dwindle.
Source: OSK
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