Friday, 1 March 2013

Alam Maritim - Riding on upwind charter rates BUY

- We maintain BUY on Alam Maritim Resources (Alam), with an unchanged fair value of RM1.10/share, pegged to an unchanged FY13F PE of 12x – at a 30% discount to the oil & gas sector’s 16x.

- We have fine-tuned FY13F-FY14F net profits on expectations that the recent upward trend in offshore support vessels’ charter rates will support the group’s earnings recovery. Also, we introduce FY15F earnings with a growth of 8% on an improved vessel utilisation rate of 5ppts and 10% growth in the offshore installation & construction (OIC) revenues.

- Alam’s FY12 pre-tax profit of RM57mil (+3.7x) came in within our expectations, 5% below our forecast of RM60mil and 3% below street’s RM59mil. But Alam’s FY12 net profit of RM60mil (+4.4x) was 7% above our forecast and 16% above street’s estimate of RM52mil, largely due to a positive 4QFY14 tax charge. The group has not declared any final dividend yet.

- The group’s 4QFY12 pre-tax profit rose 16% QoQ to RM19mil mainly due to stronger vessel utilisation and charter rates for the group’s joint ventures with CIMB Principal and Tabung Haji, while the group’s wholly-owned marine and OIC division continued to register losses.

- Currently, all the newly-built vessels under the joint ventures have been chartered out except for the group’s wholly-owned vessels, which are generally older and have a utilisation rate of around 60%. But overall vessel utilisation is expected to rise due to the recent charters secured since the beginning of the year.

- Additionally, third-party charters are expected to offset any possible losses from the group’s OIC divisions, for which management is still hopeful of turning around from freh projects this year, with the group hoping to be a main contender for the upcoming Pan-Malaysian umbrella transport & installation tender.

- We maintain our conviction that OSV charter rates have reached an inflection point with an upward trend that is fast gaining traction. The fresh Petronas Carigali charters secured earlier this year by Alam reveal that charter rates have risen from US$1.75/bhp in 2012 to US$2.20/bhp currently.

- Besides improving AHTS rates, we note that work boat charter rates have been rising at a faster pace based on Alam’s recent extension of two work boat charters which indicated an increase of 16% YoY.

- Valuations are still compelling at an FY13F PE of 9x – way below the oil & gas sector’s 17x.

Source: AmeSecurities

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