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.

Source: OSK