- We maintain BUY on Alam Maritim Resources (Alam) with an unchanged fair value of RM2.05/share, pegged to a FY14F PE of 16x – at parity to the oil & gas sector. Our forecasts are maintained as we have already incorporated FY14F-FY16F assumptions of RM100mil-RM150mil in transport and installation (T&I) orders.

- The Edge Malaysia reported that Alam is in discussions with Barakah Offshore Petroleum, Puncak Oil & Gas and SapuraKencana Petroleum to undertake subcontracting works for the 3-year Pan Malaysian T&I programme.

- This is not a surprise as we had indicated in our past reports that the major concessionaires for these works would need additional construction vessels, as occurred over the past few years. But the actual initial rollout of the T&I works has been slow in 1H2014 due to planning, procurement, engineering and mobilisation activities. Hence, any subcontracting works for Alam will only likely to materialise in 3QFY14.

- Recall that Barakah was awarded Package A which could be worth RM2bil, Puncak secured the RM3bil Package B while Sapurakencana won Packages C and D which have a value of up to RM6bil late last year.

- There are other players such as Perisai Petroleum, Target Energy, Sigur Ros and TH Heavy Engineering which have the capability to undertake some of the works from the main contractors.

- For now, we are uncertain of the actual sub-contracting jobs that could be up for offer given that SapuraKencana will be taking delivery of two new construction vessels while Puncak Oil & Gas had earlier teamed up with Leighton Holdings in the earlier tender process.

- Even if the Alam-Swiber JV is unable to secure any significant work from the main concessionaires, we expect the JV’s 1Mas-300 accommodation pipe-lay barge to be redeployed elsewhere in the region.

- We remain positive on the group’s further expansion into the group’s underwater services as Alam hopes to secure parts of the RM1.2bil-RM1.5bil contracts, which were earlier extended to Offshoreworks Group, currently in financial distress. We also understand that the group is looking at an equity raising exercise via a potential 10%-15% placement as Alam is exploring new upstream ventures such as jackup rigs.

- Valuations are compelling at an FY14F PE of 12x – 33% of the oil & gas sector’s 18x. 

Source: AmeSecurities