News
The company announced yesterday that it had secured sales for 12 vessels for an aggregate value of approximately RM446m.

6 units are anchor-handling-tug-supply (AHTS) vessels, 4 being utility support vessels and maintenance/support vessels and 2 are of the low- end vessels.

The vessels are expected to be delivered in 2012- 2013.

Comments
Positive on the news as the company is still receiving orders for new vessels.

There was no guidance in regards to margins and the split for the delivery timelines but the company announced that its current orders now stood at RM583m, including these vessel sales.


Outlook
Net profit margin was guided to be at around 15% -25% from FY12E onwards due to the normalisation of market conditions for the ship-building industry in the region.

Forays into different businesses such as 1) fabrication and engineering and 2) FPSO and FSO have yet to take off. While there is no concrete plan at this juncture, we understand that the Management is still actively looking out for opportunities to diversify its sources of earnings.

Forecast
We are maintaining our earnings estimates at this juncture given we have already imputed for some new order wins (12 AHTS and 20 tugs and barges) for FY12. (Order book at end-FY11 was RM610m).

The major catalyst to our forward estimates would be further new contract awards within the year.

Rating MAINTAIN OUTPERFORM

Valuation Our unchanged target price of RM2.53 is based on a targeted PER of 7.5x on FY13 EPS of 33.7sen.

Risks
1) Continued sluggish orders and margin erosion.
2) Inability to diversify to other business streams.

Source: Kenanga