Friday, 1 March 2013

Alam Maritim Resources - 4Q12 within expectations

Period  4Q12/12M12

Actual vs. Expectations  Alam Maritim Resources’ (“ALAM”) 4Q12 core net earnings of RM17.1m brought its FY12 net earnings to RM55.7m. This was within our full-year expectation of RM53.6m but above the consensus estimate of RM51.6m (+8.1%).

 Our core net earnings excludes a RM2.6m gain on the disposal of fixed assets and a tax credit of RM1.7m.

Dividends  No dividend was declared, below our forecasted NDPS of 0.5 sen.

Key Results Highlights  QoQ, the better performance of its jointly-controlled entities (likely due to higher contract flows performed by the subsea services and the OIC division, which worked on projects like the Sabah Oil & Gas Terminal ("SOGT") project, Samsung Engineering (Malaysia) and E8 & F13K Modules Offshore Facilities Transportation and Installation ("MOFTI"), resulted in a 10.5% rise in net earnings. This helped cushion the EBIT loss of RM3.3m, which was likely caused by subpar margins on its wholly-owned OSVs given that they are lower-spec versus those of ALAM’s associates and JVs.

 YoY, the 4Q12 net profit was a complete turnaround from the previous loss of RM400k, also due to the performance of the jointly-controlled entities which were driven by the higher OSV daily charter rates and better job prospects for the subsea and OIC divisions.

Outlook  We believe the OSV market is finally turning around and expect it to remain vibrant (similar to the heightened activity seen in 2007-2008) and as such, the stock is poised for a re-rating.

 A buoyant future outlook is expected with further OSV awards expected from the other PSC players such as Murphy Oil. (The market talk is that there will also be more awards from PCSB as well.)

 The catalysts for ALAM will be higher contract flows for its Underwater Services division (OIC and Subsea), which we are projecting only a single-digit operating profit in 2013.

Change to Forecasts  Maintaining our FY13-14 earnings estimates given that the reported net earnings were within our expectations. However, we are looking to fine-tune our forecasts pending a meeting with management. We are removing our NDPS estimates for now.

Rating   Maintain OUTPERFORM

Valuation  At an unchanged PER of 12x, we are keeping our OUTPERFORM call with a TP RM1.09 on ALAM.

Risks  1) Lower than expected OSV utilisation and 2) a continuation of its sluggish underwater services division works.

Source: Kenanga

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