Alam Maritim Resources - Closes 2012 on a strong note BUY

- We maintain BUY on Alam Maritim Resources, with an unchanged fair value of RM0.85/share, pegged to an FY12F PE of 12x – at a 25% discount to the oil & gas sector’s 16x. We maintain our FY12F-FY14F earnings as its latest charter is within our expectations. 

- Alam secured contracts totalling RM548mil for 2012, of which RM191mil stemmed from offshore installation contracts and the charter of the group’s 50%-owned pipelay barge I-MAS 300, while RM316mil involves the charter of workboats and an accommodation work barge. 

- The pace of new contract awards is within our expectations as guided by management, which targeted RM200mil fresh offshore installation contracts last year.

- Yesterday, Alam announced that it had secured a letter of intent for the supply of a straight supply vessel from an international oilfield services company at the rate of RM8mil for 9 months plus an RM11mil option to extend for 1 year. Although only a letter of intent, the announcement indicated that the contract had already commenced in 4Q2012.

- Recall that in January this year, Alam had secured  an offshore construction contract worth RM115mil with Samsung Engineering Malaysia Sdn Bhd to transport, install and pre-commission two pipelines, two single point moorings and two pipeline end manifold for the Sabah Oil & Gas Terminal. 

- These new jobs led to the group buying Crest Station 3, a 100 metre-accommodation work barge, which has a capacity of 402 crew members, from Pacific Crest Pte Ltd in June this year for RM95mil to service the 18-month charter contract (excluding a 1-year extension option) from ExxonMobil Exploration and Production Malaysia Inc.

- Given the rising need for offshore installation work, we continue to expect Alam to be awarded additional charters for its idling and spot-chartered vessels as global utilisation has tightened. We note that day rates have been slowly rising on tightening global vessel utilisation.

- Together with new offshore contracts secured since the beginning of the year, we expect the group to register a strong 3x rebound in FY12F earnings despite the loss of RM5mil in 9MFY12 from the underwater and offshore installation division, which did not secure sufficient contracts for its remote-operated vehicles.

- While the stock price has recently enjoyed a sudden spurt of excitement, valuations are still compelling at FY13F PE of 10x – way below the oil & gas sector’s 16x. We are neutral on the possibility of corporate restructuring exercises at this juncture pending further newsflows.

Source: AmeSecurities