Alam Maritim informed Bursa Malaysia yesterday that its wholly-owned subsidiary, Alam Maritim SB, was recently awarded an extension by Petronas Carigali on a contract to provide two work boats to support its painting activities for a total sum of RM70.8m. The contracts are from 25 May 2013 to 24 May 2014 and 3 July 2013 to 2 July 2014 respectively.
Charter rates improve. Based on the contract tenure and value, we understand that the average daily charter rates for both vessels have improved by some 15-20% (the previous contract was valued at some RM60.8m). This substantiates our positive view on the sector.
Positive but no change to our earnings estimates. Our forecasts are unchanged as the contract extension is in line with our estimates for FY13. We expect more contracts to be awarded to Alam’s offshore support vessel (OSV) division in the near term but maintain our cautious view on the company’s offshore, installation and construction (OIC) and subsea businesses as both divisions have yet to secure any contracts year to date.
Subsea division may land some jobs. We gather from management that its subsea may see opportunities to win some contracts as there are RM1.9bn worth of jobs being tendered out that are based on spot rates. We understand that these are renewal of contracts awarded in 2008 and are mainly long term in nature, and believe there could be some contract awards by 1H13.
Maintain BUY. We are still of the view that the stock offers good short-term trading opportunity as we expect more contracts to be secured by its OSV division. We are retaining our BUY recommendation on the stock, with an unchanged fair value of RM1.25, pegged to 13x FY13 EPS. Our fair value implies a potential return of 43% from the stock’s last traded price.
Source: OSK
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