Alam Maritim Resources Bhd
(Oct 25, RM1.17)
Maintain buy at RM1.07 with fair value under review: Alam Maritim Resources Bhd on Oct 22 announced that it had entered into a memorandum of understanding (MoU) with Yayasan Sabah Shipping Sdn Bhd (YSS), a wholly owned subsidiary of Yayasan Sabah.

The MoU includes the possibility of (i) setting up a JV company for offshore installation and construction, pipe laying, pipe replacement and so on and (ii) sharing of marine assets including supply vessels and underwater assets.

YSS is also a Petronas licensee and the group has had long working relationships with Petronas and other oil majors. Currently, it has six vessels - three oil/chemical tankers and other offshore support vessels such as crew boats and landing craft.

We view this as a strategic move for Alam as it would give it a stronger chance to be involved in the expected acceleration in Sabah's oil and gas activities. Recall that recently there was a separate tender for the provision of offshore support vessels for the peninsula and East Malaysia - something that has not been practised previously.

The outlook remains positive for marine players as demand will continue to be driven by the new 7 + 14 requirements by Petronas Carigali. Seven vessels are required for shallow water works in 2H10, and 14 vessels are required to assist in deep water exploration and production in 2011. This bodes well for Alam as the group is expecting the delivery of two DP2 deep water anchor handling tug supply vessels (AHTS) by year-end.

We understand the value of these contracts is estimated to be in the region of RM1.5 billion and does not include other requirements by PSCs such as Shell and ExxonMobil.

We reaffirm our "buy" rating on Alam with our fair value currently under review pending a company visit. - AmResearch Sdn Bhd (Oct 26)

This article appeared in The Edge Financial Daily, October 27, 2010.