- We maintain BUY on Alam Maritim Resources (Alam), but with an unchanged fair value of RM1.30/share, pegged to a FY13F PE of 13x – at a 22% discount to the oil & gas sector’s 17x.

- Alam announced yesterday that it has secured an extension of a charter, valued at RM38mil (which includes catering, lodging and de-mobilisation costs) effective from 9 October 2013 to 8 October 2014, for a workboat owned by an external party. The new charter rate of RM104k represents an 11% increase from the earlier rate of RM94k last year.

- We understand that the group is able secure margins of over 20% given that Alam was able to secure the use of the third party vessel at attractive rates. But this affirms our conviction that charter rates for marine vessels are continuing the current upward trend. Recall that Alam had secured charters for an accommodation vessel, pipe-lay barge and platform supply vessel worth RM85mil in April this year.

- For now, we maintain Alam’s FY13F-FY15F net profits, which already incorporate stronger charter rates for the group’s marine assets and offshore construction activities.

- We also understand that that there could be another whollyowned AHTS which will secure a charter on a 5+2 year period soon. Also, the group’s 49%-owned JV with Tabung Haji has recently received delivery of two 12,000bhp AHTS, for which Alam hopes to secure charters over the next few months.

- Since the beginning of the year, Alam has secured contracts worth RM1bil, of which 80% are marine charters which are for vessels that are either wholly-owned, under JVs or for third parties. As a comparison, Alam’s order book had reached its peak of only RM1.1bil in 2008 vs. its current order book of RM1.3bil currently.

- Alam secured a RM182mil underwater services contract earlier this year from Talisman, which was originally contracted to Offshoreworks Group. We understand that Alam hopes to clinch RM1.2bil-RM1.5bil contracts for underwater services, which were also earlier extended to Offshoreworks Group, which currently appears to be in financial distress.

- Additionally, the group hopes to secure part of the concession for the Pan-Malaysian transport and installation umbrella contract, worth RM3bil-RM5bil annually, which may be open for bidding later this year.

- Valuations are still compelling at an FY13F PE of 11x – way below the oil & gas sector’s 17x.

Source: AmeSecurities