Journey to Wealth
Alam Maritim Resources - First OSV announcement for 2013
News Alam Maritim Resources Bhd announced that its wholly-owned subsidiary, Alam Maritim (M) S/B, had been awarded a contract worth RM19.0m from an international oilfield provider that resides in Malaysia.
The contract, which started in 4Q12, is to supply a unit of straight supply vessel (SSV) for a primary period of 9 months (RM8.1m) with an extension option of 12 months (RM10.9m).
Comments We are positive on the contract as it shows that ALAM is able to secure long term charter contracts with the OSV contracts flow being in line with our sector report dated 19 Dec 2012.
The daily charter rate (DCR) for this contract is slightly higher (USD1.90/bhp) as compared to the DCR of the contract won in early 2012 (USD1.80/bhp).
Based on a projected 20% net margin for the contract value of RM19.0m, we expect a net income contribution of RM3.8m from the entire contract.
For FY12, we expect a proportionate net earnings recognition of c.RM0.5m for 4Q12, which we have already imputed in earlier into our FY12 estimates.
Outlook ALAM's share price has rallied strongly by 12% since last Wednesday, which we believe is due to the market expecting the group to benefit from the upcoming OSV contract awards by Petronas.
The trend of its increasing order book implies a better prospect for the group and the sector moving forward.
We remain optimistic on ALAM as the company's turnaround story is intact and hence we are expecting a strong set of FY12 earnings results, which is due to be announced in February 2013.
Forecast We are keeping our FY12-FY14E earnings forecasts unchanged.
Rating MAINTAIN OUTPERFORM
Valuation At an unchanged PER of 10x, we are keeping our OUTPERFORM call with a TP RM0.92 on ALAM.
Risks Lower than expected OSV utilisation and charter rates
A slower than expected project replenishments.
Idle activities for its Underwater Services division (OIC & Subsea) after the completion and recognition of SOGT.
Source: Kenanga
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