Alam Maritim Resources - Another contract in its bag

News   Yesterday, Alam Maritim Resources (“ALAM”) announced that its 50% jointly controlled entity, Alam Swiber DLB (L) Inc, had recently entered into a RM18m charter party agreement with Newcruz Offshore Marine Pte Ltd.

The RM18m spot charter contract is to charter out its pipe lay barge identified as 1MAS-300 for a firm charter period of 175 days, which is to start immediately.

Comments   We are positive on the news as it shows that ALAM is able to mobilise its pipe lay barge on a spot term basis to keep the vessel occupied during the domestic monsoon season.

We have been guided that the pipe lay barge is to be chartered out to India in bareboat condition, hence giving a better earnings margin to the group on the back of the lower cost incurred compared to time charter condition.

As guided by the management, the daily charter rate is USD35k (~RM108,000) for a firm period of 175 days. Based on a projected 35% net margin for the contract value of RM18m, we expect a net income contribution of RM6.3m from this entire contract.

We expect proportionate net earnings recognition of RM1.6m each for 4Q12 and 1Q13, respectively, which we have factored in into our FY12-FY13 estimates earlier.

Outlook   We understand that Newcruz Offshore Marine Pte Ltd and Swiber Offshore (India) Pvt Ltd are Swiber Holdings Limited’s subsidiaries. Through such a strategic networking tie-up, we believe that ALAM will be able to secure more international charter agreements in the future.

The trend of its increasing order book implies a better prospect for the group and the sector moving forward. We expect a strong 2H12 on the back of 1) an assumed vessel utilisation rate of a healthy 80% for its OSV segment and 2) the execution of the remaining RM10m of its RM20m SOGT project in its US segment.

Forecast   We are keeping our FY12-FY14 earnings forecasts unchanged.

Rating   MAINTAIN OUTPERFORM

Valuation   Maintaining our TP of RM1.14 based on CY13 PER of 10x.

Risks   Lower-than-expected OSV utilisation and charter rates

Slower-than-expected project replenishments.

Source: Kenanga