Journey to Wealth
Alam Maritim Resources 3Q12 within expectations
Period 3Q12/9M12
Actual vs. Expectations Alam Maritim Resources ('ALAM') registered 3Q12 net earnings of RM15.5m, which were within ours and the street's expectations. This brought its 9M12 net earnings to RM39.0m, which accounted for 72% and 76% of ours and the street's FY12 full-year estimates respectively.
Dividends No dividend was declared as expected.
Key Results Highlights QoQ, the net earnings dropped by 4% due mainly to two factors, i.e. 1) a lower group revenue in 3Q12 as the revenue recognition for SOGT had been mostly recognised earlier in 2Q12 and 2) a higher effective tax rate in the quarter of 7%. Note that at the pre-tax level, ALAM's 3Q12 PBT actually grew by 5% to RM15.9m from RM15.2m in 2Q12.
Offshore Support Vessels (OSV) recorded an impressive turnover improvement by 94% as ALAM secured a few long contracts in 9M12. Its core earnings driver unit, OSV saw its EBIT soaring by ~100% QoQ, underpinned by a higher vessels utilisation rate and daily chartered rate, especially for its jointly owned vessels with CIMB Private Equity.
In addition, its Underwater Services (US) unit narrowed its loss before tax in 3Q12 to RM1.1m from RM2.5m in the preceding quarter, mainly driven by the SOGT project completion in 3Q12.
As a result, ALAM's 9M12 net profit rose significantly by >100% to RM39.0m from RM13.0m a year ago. The highlight is its US division, which performed outstandingly as it secured two major projects namely SOGT (awarded by Samsung Engineering S/B) and MOFTI (secured from Sarawak Shell Bhd).
Outlook We remain positive on ALAM as the company's turnaround story is being proven to be very real and intact and hence, we are expecting a stable 4Q12 earnings results. This is on the back of an assumed healthy vessels utilisation rate of 80% coupled with an increasing better daily chartered rate (USD 1.80/bhp) for the OSV.
Change to Forecasts We are maintaining our FY12-FY14E estimates with assumptions of an 80% utilisation rate for OSV and a projected EBIT margin of 7% for US.
Rating MAINTAIN OUTPERFORM
Valuation At an unchanged PER of 10x, we are keeping our OUTPERFORM call with a TP RM0.92 on ALAM.
Risks 1) Lower than expected OSV utilisation, and
2) A low rate of project replenishments, which would put its forward earnings at risk.
Source: Kenanga
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