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

- Alam has secured a charter contract for an anchor handling tug supply (AHTS) vessel valued at RM22mil, which covers a firm period of 6 months and an option to extend for two months.

- Based on an AHTS with an engine capacity of 12,000 brake horse power (bhp), the charter rate of US$2.39/bhp represents a YoY increase of 20% and is consistent with the current market rate for new vessels. Hence, we continue to be positive on charter rates for the AHTS market segment, underpinned by a need for additional 10-15 vessels this year in Malaysia.

- For this charter, Alam will be using the 12,000 bhp AHTS which is under a 50:50 JV with Tabung Haji and is currently on spot charter. Among the vessels under JVs, there is now only one 12,000bhp anchor-handling tug supply vessels under JV with Tabung Haji that is on spot charter. But we understand that this remaining spot charter vessel may be securing a long term charter soon.

- With 15 charters for AHTS and straight supply vessels secured so far this year, we understand that the group’s vessel utilisation rate for its wholly-owned fleet has risen QoQ from 70% to 80% currently with the rest of the vessels on spot charters.

- YTD, Alam has secured contracts worth RM1,240mil, of which 80% 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 maintain FY13F-15F earnings with assumed higher vessel utilisation rates of 80%-90% as well as underwater/offshore installation & construction orders of RM300mil-RM500mil.

- 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. Hence, the group may enter a jointventure 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-RM5bil annually, which may be opened for bidding later this year.

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

Source: AmeSecurities