Alam Maritim’s 2017 core net loss widened 4% yoy to RM87.2m, dragged down by weaker revenue and larger losses from its jointventure operation. We are increasing our loss assumptions for 2018- 19E due to the murky outlook. Maintain our SELL call with a lower TP of RM0.11 (from RM0.15) based on an unchanged 0.2x 2018E P/BV.

2017 Loss Larger Than Expected

2017 revenue slumped 30% yoy to RM159.9m mainly due to weaker offshore marine services and subsea/offshore installation & construction (OIC) revenue, which fell by 21% and 42%, respectively. Offshore marine services continued to see lower vessel utilisation and daily charter rates (DCR), while OIC continues to suffer from low work activities. The 2017 core net loss widened 4% yoy to RM87.2m, which was larger than expected (both on our and consensus estimates).

Joint Venture Pulls Down 4Q Earnings

Sequentially, 4Q revenue inched up 2% to RM43.1m due to higher vessel utilisation rates which partly offset the weaker OIC business. However, its core net loss widened more than 2-fold to RM62m from RM17m in 3Q17 as results were dragged down by the larger losses from its joint-venture business.

Maintain SELL

We increase our 2018-19E loss forecasts as we assume a lower vessel DCR and higher cost structure than earlier expected. We maintain our SELL rating with a lower 12-month target price of RM0.11 (from RM0.15) based on an unchanged 0.2x 2018E P/BV. Key upside risks to our call include a faster-than-expected recovery in the OSV market and better OSV utilization rates.

Source: Affin Hwang Research - 1 Mar 2018