Alam's FY11 results came in below expectations, largely  due to the lower contribution from its offshore support vessels as a result ofthe monsoon season, higher other operating expenses  and inferior contribution from its underwaterservices/offshore installation and construction. Nevertheless, we are expectingAlam's business prospects to improve in FY12 on the back of higher demand for vesselservices from marginal oilfield and brownfield services.  Maintain Neutral with an unchanged FV ofRM0.85 based on existing PER of 12x FY12 EPS.

Underperformance.The FY11 results were below consensus and our expectations making up 30% and50% of  the respective FY11 forecasts.Overall, the disappointment arose from lower ontribution from its offshoresupport vessels which were affected by the monsoon season, higher otheroperating expenses and lower contribution from its underwater services/offshoreinstallation and construction. All these factors  caused its 4QFY11 bottomline to sink into anet loss of RM0.7m, a significant drop from a net profit of RM13.4m in 3QFY11.Nevertheless, on a  y-o-y  comparison, the  full-year FY11 performance  turned out to bebetter, lifted by a stronger 2Q and 3Q, while its FY10 performance was affectedby the one-off Vastalux provision in 4QFY10.

Better prospectsexpected in FY12 onwards. Given that marginal oilfield and brownfield servicesshould start  to see heightenedactivities in FY12 onwards  consideringthe planned capex to be rolled out by Petronas and its PSC contractors, we areexpecting the demand for offshore support vessels to improve moving forward andthis would definitely benefit Alam's vessels from the standpoint of moreattractive charter rates and longerterm contracts.  We are expecting its utilization rate toprogressively improve and be consistent at 70%-80% compared to the situation inFY11, during which its utilization rate swung from 50% to 80% within weeks dueto the spot charter for some of its vessels.

Maintain Neutral.  Our fair value for Alam remains unchanged atRM0.85 based on existing PER of 12x FY12 EPS. Although we  are positive of the company's  future prospects,we are keeping our call and PE valuation unchanged for now until we see the positive  industry developments filter down to Alam's earnings. Hence,  we maintain  our Neutral call fornow.

Source: OSK188