News Yesterday, Alam Maritim Resources Bhd (“AMRB”)
announced that its wholly-owned subsidiary, Alam Maritim (M) S/B (“ALAM”) had been
awarded a contract worth RM125.6m from ExxonMobil Exploration and Production
Malaysia Inc (EMEPMI).
The mentioned
contract is to supply one accommodation barge for a primary period of 18 months
with an extension option of 12 months.
Comments This
accommodation barge will be a JV asset where ALAM will hold a 51% stake and the
remainder held by a Labuan partnership. According to its previous contract
which with similar barge chartered out, had shown it generated a good income as
the daily charter rate was recorded at RM78k in 2010.
The company plans to
inject RM100.0m CAPEX into this contract with a capital structure of 80% loan
facility and 20% internal funding. We believe that this contract will play an important
part to ALAM’s turnaround story in 2012 as the company is looking at a 35% net margin
from the contract. Given ALAM’s 51% stake, this contract is set to bring in a
net profit of RM22.4m and supported by a better daily charter rate of RM105k.
Outlook We are
positive on the announcement as it is in line with its turnaround story. We
strongly believe our current FY12E order book replenishment assumption of
RM437.3m is conservative and expects the group to surprise on the upside.
Currently, ALAM has
submitted its tender application for a subsea contract which requires supply
vessels and diving equipments. This 3+2 subsea
contract, worth RM1.2-1.4b, should be announced and awarded by August 2012 as
its current subsea projects will expire in July 2012.
Forecast We are
revising FY12E-14E earnings to RM62.1m-RM94.9m to incorporate this announcement.
For FY14E, we have assumed a daily charter rate of USD75k with an operating profit
margin of 35% for this proposed 51%-owned barge asset.
Rating MAINTAIN OUTPERFORM
We believe the
company will continue to receive more contracts and see strong earnings growth in
FY12E as a result of its improving vessels utilisation rate and with the group
aggressively bidding for more long term contracts.
Valuation Upgrading our TP to RM1.14 based on 10x PER(-0.5
forward standard deviation from the mean) on our FY12E EPS estimate of 8.3 sen.
Risks Delays
in contracts being awarded and hence leading to delays in projects execution.
OSV overall
profitability being dragged down by other loss making divisions within the
group.
Source: Kenanga
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