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

- Alam has secured a contract, potentially valued up to RM39mil, to provide underwater services from an unnamed local oil & gas company. The contract covers a firm period of 30 days with an option for extension of up to a maximum of 21 days.

- Since the beginning of the year, Alam has secured RM246mil underwater services contracts from Talisman and other local companies. But this new contract is within our expectations as our FY13F-FY15F assumptions incorporate underwater/offshore installation & construction orders of RM300mil-RM500mil. Hence, we maintain our forecasts.

- Nevertheless, this development underpins our view that the group’s earnings prospects are improving, as the offshore installation & construction and underwater services divisions, which made a combined loss of RM7mil last year, are expected to turn around on the back of an acceleration of new jobs.

- YTD, Alam has secured contracts worth RM1,173mil, of which 79% are marine charters for vessels that are either wholly-owned, under JVs or for third parties. For 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. We understand that the group may enter a joint-venture with Pacific Radius to acquire two diving support vessels to service its subsea inspection, repair & maintenance contracts, which could easily double prospective net margins from 10%-15% currently.

- Additionally, the group hopes to secure part of the concession for the Pan-Malaysian transport and installation umbrella contract, worth RM3bil-RM5bilannually, which may be open for bidding later this year.

- Among the vessels under joint-ventures, only two 5,000bhp anchor-handling tug supply vessels – MV Setia Unggul and Gigih – are on spot charters. For the group’s wholly-owned vessels, fleet utilisation is at 85%, which means that only 4 vessels are on spot rates currently.

- Valuations are compelling at an FY14F PE of 10x – way below the oil & gas sector’s 17x.

Source: AmeSecurities