Malaysian Rating Corporation (MARC) has lowered the outlook for Alam’s RM230m Sukuk Ijarah medium terms notes to negative (from stable), while maintaining its A+IS Rating. MARC said the negative outlook reflects a decline in Alam’s 9M14 revenue and consolidated earnings, as well as the softening industry trends in the offshore support vessel segment. (Source: MARC)

Comment: We are neutral on the downgrade. We believe that the decline in Alam’s  share  price  (-52%  since  end-Sep14)  and  the  cut  in   consensus earnings  (-29%  since  end-Sep14)  have  largely  been  reflected  its  weaker business  outlook.  As  such,  the  impact  of  the  downgrade  will  likely  to  be muted.  Maintain  BUY  with  an  unchanged  TP  of  RM0.70  based  on  10x 2015E PER.

Source: Affin Hwang Capital Research - 12 Jan 2015