- 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.
- Alam secured two contracts worth RM25mil to undertake underwater services from an unnamed local oil & gas company. These non-renewable contracts, which cover up to 21 days and 150 days respectively, are the first underwater jobs secured for the year.
- We are positive that Alam is securing contracts for this underwater division which suffered an FY12 loss of RM8mil together with its offshore installation & construction (OIC) division due to lack of contracts. Recall that the underwater division is supported by diving teams operating sixremotely operated vehicles and saturation diving systems.
- But this new contract does not change our FY13F-FY15F earnings as we have already assumed contracts worth RM300mil-RM350mil for the OIC and underwater division. We have assumed minimal contributions for FY13F but expect a stronger EBIT of RM16mil-RM18mil in FY14FFY15F.
- Currently, the group’s main earnings stem from its jointventures and associates which have newer built offshore support vessels (OSV) and higher specifications. All the newly-built vessels under the joint-ventures have been chartered out presently except for the group’s whollyowned 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 vessel charters are expected to offset any possible losses from the group’s OIC divisions, for which management is still hopeful of turning around from fresh 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.