Journey to Wealth
Alam Maritim - OUTPERFORM - 29 May 2012
News Yesterday, Alam Maritim Resources Bhd ('AMRB') announced that its wholly-owned subsidiary, Alam Maritim (M) S/B ('ALAM') had been awarded a contract worth RM125.6m from ExxonMobil Exploration and Production Malaysia Inc (EMEPMI).
The mentioned contract is to supply one accommodation barge for a primary period of 18 months with an extension option of 12 months.
Comments This accommodation barge will be a JV asset where ALAM will hold a 51% stake and the remainder held by a Labuan partnership. According to its previous contract which with similar barge chartered out, had shown it generated a good income as the daily charter rate was recorded at RM78k in 2010.
The company plans to inject RM100.0m CAPEX into this contract with a capital structure of 80% loan facility and 20% internal funding. We believe that this contract will play an important part to ALAM's turnaround story in 2012 as the company is looking at a 35% net margin from the contract. Given ALAM's 51% stake, this contract is set to bring in a net profit of RM22.4m and supported by a better daily charter rate of RM105k.
Outlook We are positive on the announcement as it is in line with its turnaround story. We strongly believe our current FY12E order book replenishment assumption of RM437.3m is conservative and expects the group to surprise on the upside.
Currently, ALAM has submitted its tender application for a subsea contract which requires supply vessels and diving equipments. This 3+2 subsea contract, worth RM1.2-1.4b, should be announced and awarded by August 2012 as its current subsea projects will expire in July 2012.
Forecast We are revising FY12E-14E earnings to RM62.1m-RM94.9m to incorporate this announcement. For FY14E, we have assumed a daily charter rate of USD75k with an operating profit margin of 35% for this proposed 51%-owned barge asset.
Rating MAINTAIN OUTPERFORM
We believe the company will continue to receive more contracts and see strong earnings growth in FY12E as a result of its improving vessels utilisation rate and with the group aggressively bidding for more long term contracts.
Valuation Upgrading our TP to RM1.14 based on 10x PER(-0.5 forward standard deviation from the mean) on our FY12E EPS estimate of 8.3 sen.
Risks Delays in contracts being awarded and hence leading to delays in projects execution.
OSV overall profitability being dragged down by other loss making divisions within the group.
Source: Kenanga
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