- We maintain BUY on Alam Maritim Resources (Alam) with an unchanged fair value of RM1.60/share, pegged to a FY14F PE of 14x – at a 10% discount to the oil & gas sector’s 16x.

- We maintain Alam’s FY13F-FY15F net profits even though Alam’s 1QFY13 results came in above expectations, accounting for 28% of our FY13 net profit of RM79mil and 29% of general consensus’ RM78mil.

- This is because Alam’s 2QFY13 may be slightly weaker due to: (1) lower contributions from the offshore installation & commissioning (OIC) division, and (2) lower margin from the offshore support vessel (OSV) segment as the two recently delivered anchor handling tug supply vessels, which have engine capacities of 12,000 brake horse power and under the group’s 49%-owned JV with Tabung Haji, may be under-utilised on spot charters currently.

- On a YoY comparison, Alam’s revenue surged 69%, propelling its net profit by 3x due to its wholly-owned OSVs, jointly-controlled OSVs and subsea/OIC segments.

- But sequentially, the group’s 1QFY13 revenue fell 44% to RM93mil due to lower subsea/OIC contributions and lower third-party OSV charters. But Alam’s pre-tax profit rose 36% QoQ to RM25mil mainly due to stronger vessel utilisation and charter rates for the group’s wholly-owned vessels and higher margins from the OIC division.

- Currently, all the newly-built vessels under the jointventures have been chartered out except for the group’s wholly-owned vessels, which are generally older and utilisation rates have risen from 60% to 70%. Overall vessel utilisation is expected to rise due to the recent charters secured since the beginning of the year.

- 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 current order book of RM1.3bil has surpassed its 2008 peak of RM1.1bil.

- We understand that Alam hopes to clinch RM1.2bilRM1.5bil contracts for underwater services, which were 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 PanMalaysian transport and installation umbrella contract, worth RM3bil-RM5bil annually, which may be open for bidding later this year.

- Valuations are still compelling at an FY14F PE of 11x – way below the oil & gas sector’s 16x.

Source: AmeSecurities