Alam Maritim’s 3Q17 swung back into the red with a loss of RM10.8m. Although the loss was smaller than what we had anticipated, it negatively surprised the street. We are lowering our loss assumptions for FY17-19E, and maintaining our SELL rating with no changes to our target price of RM0.15 based on 0.2x 2018E P/BV.

9M17 Loss Below Expectations

9M17 revenue fell 42% yoy to RM116.7m mainly due to a weaker offshore installation and construction (OIC) segment which saw revenue decline by 56%, while the OSV segment fell by marginal 3%. Core net losses widened from RM2.2m in 9M16 to RM25.2m, due to higher operating costs incurred from the OSV segment.

QoQ Back to Losses

3Q17 revenue declined 22% qoq mainly dragged by the weaker OIC segment due to significantly lower billing. However, OSV revenue provided some support, which saw revenue increasing from RM12.3m to RM25.2m qoq, as a result of better vessel utilisation. At the pretax level, earnings swung from a RM1.7m profit in 2Q17 to a RM8.1m loss in 3Q17, due to higher operating costs incurred.

Maintain SELL

We revise down our FY17-19E loss forecasts as we lower our cost assumptions. We maintain our SELL rating on the stock with a TP of RM0.15 based on unchanged 0.2x 2018E P/BV. Key upside risks to our call include a quicker-than-expected recovery in the OSV market and better OSV utilization rates.

Source: Affin Hwang Research - 27 Nov 2017