- 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 FY14F-FY15F net profits but raise FY13F earnings by 15% to RM91mil as Alam’s 9MFY13 net profit of RM73mil came in above expectations, accounting for 91% of our earlier FY13 estimates of RM79mil and 89% of general consensus’ RM83mil.

- Sequentially, the group’s 3QFY13 revenue surged by 2.4x to RM180mil largely due to recognition for charters

undertaken by third party vessels, as well as for higher utilisation of Alam’s own fleet. However, Alam’s net profit fell by 26% QoQ to RM22mil as the margins for third party vessels are lower than the group’s own assets.

- Alam’s 9MFY13 revenue rose by 4% YoY to RM347mil due to higher marine charters from externally sourced vessels as well as higher utilisation of the group’s own fleet. Net profit surged much higher by 88% YoY to RM73mil due to higher charter rates and utilisation of the group’s vessels, third party vessels and recognition of subsea and underwater installation and construction work.

- We caution that Alam’s 4QFY13 may be weaker QoQ 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), with 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.

- With 16 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 RM1,278mil, of which 81% 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 RM1.2bil-RM1.5bil 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 Package A of Pan-Malaysian transport and installation umbrella contract, which may be potentially worth RM400mil annually.

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

Source: AmeSecurities