- We maintain BUY on Alam Maritim Resources (Alam) with an unchanged fair value of RM2.45/share, pegged to a FY14F PE of 16x – on parity to the oil & gas sector.

- We maintain Alam’s FY13F-FY15F net profits for now even though Alam’s 1HFY13 net profit of RM52mil (2x YoY) came in above expectations, accounting for 66% of our FY13 net profit of RM79mil estimates and 63% of general consensus’ RM82mil.

- This is because Alam’s 2HFY13 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 (AHTS), which have engine capacities of 12,000 brake horse power (bhp) 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 1HFY13 revenue contracted by 24% to RM167mil due to the lower offshore installation and construction jobs but net profit doubled due to its wholly-owned OSVs, jointly-controlled OSVs and subsea segments.

- Likewise sequentially, the group’s 2QFY13 revenue fell by 21% to RM74mil due to lower subsea/OIC contributions and lower third-party OSV charters. But Alam’s net profit rose by 32% QoQ to RM29mil mainly due to stronger vessel utilisation and charter rates for the group’s whollyowned vessels.

- With the exception of the two new 12,000bhp AHTS, all the newly-built vessels under Alam’s joint-ventures have been chartered out. For the group’s wholly-owned vessels, 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.

- YTD, Alam has secured contracts worth RM1bil, of which 80% are marine charters for vessels that are either whollyowned, 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 secure RM1.2bilRM1.5bil contracts for underwater services, which were earlier extended to Offshoreworks Group, currently 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 compelling at an FY14F PE of 10x – way below the oil & gas sector’s 17x.

Source: AmeSecurities