Alam Maritim reported on Bursa Malaysia last Friday that its wholly-owned subsidiary, Alam Maritim SB, was recently awarded an extension on a contract for the provision of one unit of accommodation work barge for a sum of approximately RM33.6m (inclusive of catering, lodging and de-mobilisation cost). The contract will be effective from 12 Jan 2013 to 11 Jan 2014 for a firm period of one year.
A good start to 2013. The contract is Alam's second contract win in 2013 and brings the total value of contracts awarded thus far to RM44.5m. Despite the positive news, we are making no changes to our FY13 earnings estimates as we have previously factored in some orderbook replenishment for Alam's vessels.
Risk remains with its OIC and subsea businesses. We gather that Alam's offshore support vessel (OSV) business will continue to flourish in 1Q13 in anticipation of more contract wins coupled with decent charter rates of around USD1.8-USD2.2 per bhp. That said, the company's risk remains with its offshore, installation & construction (OIC) and subsea businesses as it has yet to secure any new contracts for either. The two divisions are currently working on jobs in the Sabah Oil & Gas Terminal awarded by Samsung engineering and E8 & F13K Modules Offshore Facilities Transportation and Installation awarded by Sarawak Shell. We expect these works to be completed by 2Q13. As such, Alam will need to secure new contracts for the two divisions or risk offsetting gains from its thriving OSV business, which will prompt us to downgrade its earnings.
Maintain BUY. Our FV for Alam implies a potential 57.2% upside from its last closing price of RM0.795. As the stock is trading at a cheap valuation of 8.1x FY13 EPS compared to the sector average of 13.8x (based on OSK's estimates), we advocate investors to accumulate Alam in anticipation of more contract wins in the near term.